The Effect on the Statement of Financial Position When a Debtor

question 62

Multiple Choice

The effect on the statement of financial position when a debtor pays the amount that is owed is:

• A)increase asset bank; decrease asset debtor; increase equity.
• B)increase asset bank; increase equity.
• C)increase asset bank; decrease asset debtor.
• D)none of the above.

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Definitions:

Sunk Costs

Past expenses that have already been incurred and cannot be recovered, and therefore should not affect future business decisions.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales.

Cost Of Capital

The rate of return that a business needs to generate from its investments in order to cover the cost of raising funds, either through debt or equity.

Capital Budgeting

The process used by companies to evaluate which major projects or investments should receive funding.