Which One of the Following Is a Capital Budgeting Decision

question 58

Multiple Choice

Which one of the following is a capital budgeting decision?

• A)Determining how much debt should be borrowed from a particular lender
• B)Deciding whether or not a new production facility should be built
• C)Deciding when to repay a long-term debt
• D)Determining how much inventory to keep on hand
• E)Deciding how much credit to grant to a particular customer

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Definitions:

Debt-equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by its shareholder's equity.

Growth Rate

Growth rate refers to the percentage increase in the size or value of something over a specific period.

Retains Earnings

Profits that a company chooses to re-invest in the business rather than distribute to shareholders.

Capital Intensity Ratio

The capital intensity ratio measures the amount of capital needed per dollar of revenue; a higher ratio indicates that more assets are needed to generate income.