All Businesses Are Involved in Three Types of Activity-Financing, Investing

question 10

Multiple Choice

All businesses are involved in three types of activity-financing, investing, and operating. For example, the founder of Tootsie Roll needed financing to start and grow his business. This may have come from either personal savings or outside sources. The cash obtained was then invested in the equipment necessary to run the business, such as mixing equipment and delivery vehicles. Once this equipment was in place, the founder could begin the operating activities of making and selling candy. Paul D. Kimmel, et al., Financial Accounting, 3^rd edition

• A) Argument; conclusion: The cash obtained ... delivery vehicles.
• B) Argument; conclusion: Once this equipment was in place ... selling candy.
• C) Argument; conclusion: The founder of Tootsie Roll ... grow his business.
• D) Argument; conclusion: All businesses are involved ... and operating.
• E) Nonargument.

---

Definitions:

Cobb-Douglas Preferences

A utility function used in economics to represent preferences of consumers, characterized by goods being perfect substitutes or complements to some degree.

Utility Function

An expression used in economics to quantify the happiness or satisfaction gained from consuming a set of goods or services.

Consumption Bundle

A combination of different goods and services that a consumer chooses to purchase at a given time.

Quasilinear Preferences

Preferences represented by utility functions where the marginal utility of consumption is constant irrespective of other goods consumed.