When an Entrepreneur Invests His Own Financial Capital in Order

question 423

Multiple Choice

When an entrepreneur invests his own financial capital in order to start a business

• A) the opportunity cost of capital should be included in the economic cost of doing business.
• B) the investment is treated as a fixed cost, so it should not be considered as a cost of doing business.
• C) the firm's economic profits will exceed its accounting profits.
• D) the accounting costs increase because the funds would otherwise have to be borrowed.

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Definitions:

Voidable

A term describing a legal contract or action that may be nullified or terminated at the discretion of one or both parties involved.

Covenant Not to Compete

An agreement where one party agrees not to enter into or start a similar profession or trade in competition against another party.

Ongoing Business

A company or commercial enterprise that continues to operate and engage in its activities, as opposed to one that is in the process of closing down or has ceased operations.

Noncompetition

An agreement, often within a contract, that restricts one party from competing directly with another party, usually after termination of the agreement.