The Return on Capital Is Greater Than the Price of Loanable

question 81

Multiple Choice

The return on capital is greater than the price of loanable funds. It follows that firms will

• A)borrow funds, the capital stock will rise, and eventually the return on capital will fall.
• B)borrow funds, the capital stock will fall, and eventually the return on capital will rise.
• C)not borrow funds and, as a result, the price of credit will rise.
• D)not borrow funds and eventually the capital stock will decrease and the return on capital will fall.

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Definitions:

Profit Sharing

A compensation strategy where employees receive a portion of the company's profits, aligning their interests with the financial success of the business.

Gain-Sharing

A plan that allows employees to share in cost savings or productivity gains realized by their efforts.

Net Profits

The financial gain attained by a business after subtracting all operating expenses, interest, taxes, and any other necessary expenditures from its total revenue.

Fringe Benefits

Fringe benefits are additional advantages or compensations provided to employees on top of their regular salary, such as health insurance, paid vacations, and retirement plans.