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Really Big Homebuilders Used to Purchase Many Building Lots and Erect

question 48

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Really Big Homebuilders used to purchase many building lots and erect spec homes (i.e.,it gambled that the demand for new houses would be so high that they would sell easily) .Since the real estate slowdown,it builds homes only when owners are under contract.Most likely the company is pursuing a generic business strategy of ________.


Definitions:

Marginal Propensity

Describes the portion of additional income that an individual is willing to spend on consumption rather than saving.

Off-Balance Sheet Financing

Off-balance sheet financing is the use of funding or financial activities not recorded on the company's balance sheet to keep debt ratios low.

Capitalizing A Lease

The process of recognizing a leased asset and related lease liability on the balance sheet, treating the lease as a purchase financed by a loan.

Capital Lease

A lease considered a purchase of an asset for accounting purposes, where the lessee acquires all risks and rewards associated with ownership.

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