A Firm Decides to Pay for a Small Investment Project

question 72

Multiple Choice

A firm decides to pay for a small investment project through a $1 million increase in short-term bank loans.This is best described as an example of a(n) :

• A) financing decision.
• B) investment decision.
• C) capital budgeting decision.
• D) capital expenditure decision.

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Definitions:

Net Capital Loss

The financial loss that occurs when the total capital losses from investments exceed the total capital gains in a fiscal year.

Carry Back

A tax provision that allows a business to apply current year net operating losses to past tax years to receive a tax refund for previously paid taxes.

Carry Forward

A tax provision allowing taxpayers to apply a current year's unused tax credits or losses to future tax years.

80% Test

A requirement or threshold in various contexts where at least 80% of some criteria must be met, but in finance, it often relates to rules around shareholder voting rights or dividend distribution policies.