Net Capital Spending

question 407

Multiple Choice

Net capital spending:

• A) Is negative if the sale of fixed assets is greater than the acquisition of current assets.
• B) Is equal to zero if the decrease in the fixed assets account is equal to the depreciation expense for the period.
• C) Reflects the net changes in total assets over a stated period of time.
• D) Is equivalent to the cash flow from assets.
• E) Is equal to the ending net fixed assets minus the beginning net fixed assets.

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Definitions:

Precautionary Cash Balances

Precautionary cash balances refer to money held by both businesses and individuals to meet unexpected expenses or financial emergencies.

Unexpected Expenditures

Expenses that were not planned or budgeted for, often requiring immediate payment.

Risk-Averse

A description of an investor or decision-maker who prefers to minimize uncertainty or potential loss, favoring safer over riskier options.

Financial Intermediary

An institution that acts as a middleman between savers and borrowers, including banks, investment companies, and insurance companies.