Regarding the Use of Funds Generated Within the Firm

question 186

Multiple Choice

Regarding the use of funds generated within the firm:

• A) Reinvesting cash generated from operations is usually more expensive than borrowing money.
• B) A company with a product that has significant growth potential should invest the earnings from that product to salvage declining products.
• C) Indirect distribution usually requires more investment capital for a producer than does direct distribution.
• D) When finances are tight, companies should look for strategy alternatives that help get a better return on money already invested.
• E) All of the above.

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Definitions:

Incremental Net Operating Income

The difference in net operating income between two alternatives.

Depreciated

Refers to the decrease in the value of an asset over time due to wear and tear or obsolescence.

Sales Revenues

The total amount of money generated from the sale of goods or services before any costs or expenses are deducted.

Cash Operating Expenses

The expenses a company incurs during its day-to-day operational activities, paid in cash, such as rent, utilities, and salary payments.