The Firm Set Aside a Little Extra Money Just in Case

question 38

Multiple Choice

The firm set aside a little extra money just in case an unforeseen element of cost pushed the project beyond what they had budgeted.This extra money is called:

• A)A rainy day fund.
• B)A contingency reserve.
• C)An escalation clause.
• D)A sinking fund.

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Definitions:

Monetary Outlay

The amount of money spent on a particular transaction or investment.

Implicit Costs

The opportunity costs that arise when a company uses internal resources without a direct payment.

Explicit Costs

Direct payment made to others in the course of running a business, such as wages, rent, and materials.

Accounting Profits

The net income of a company determined by subtracting total expenses from total revenues, according to generally accepted accounting principles.