When a Business Purchases Land with a Note Payable

question 138

Multiple Choice

When a business purchases land with a note payable:

• A)both assets and stockholders' equity are increased.
• B)assets are decreased and stockholder's equity is increased.
• C)both assets and liabilities are increased.
• D)assets are increased and liabilities are decreased.

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Definitions:

Total Assets

The total of everything of value owned by a company, including cash, investments, property, and equipment, as recorded on the balance sheet.

Operating Efficiency

A measure of how well a company uses its assets and liabilities internally to produce a profit.

Financial Efficiency

A measure of how well a company utilizes its assets and manages its liabilities to generate income, often assessed through ratios such as return on assets or equity.

EBIT

This metric, known as Earnings Before Interest and Taxes, calculates a business's profitability without taking into account expenses from interest and taxes.