Which One of the Following Is an Example of a "Flexibility

question 7

Multiple Choice

Which one of the following is an example of a "flexibility" option?

• A) a company has an option to close down an operation if it turns out to be unprofitable.
• B) a company agrees to pay more to build a plant in order to be able to change the plant's inputs and/or outputs at a later date if conditions change.
• C) a company invests in a project today to gain knowledge that may enable it to expand into different markets at a later date.
• D) a company invests in a jet aircraft so that its ceo, who must travel frequently, can arrive for distant meetings feeling less tired than if he had to fly commercial.
• E) a company has an option to invest in a project today or to wait a year.

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Definitions:

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders, which are reinvested into the business.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Stock Dividend

A payment made to shareholders in the form of additional shares in the company, rather than cash.

Cash Dividend

A direct payment of profits made by a company to its shareholders, usually in cash.