Which of the Following Statements Represents Good Advice Prior to Making

question 92

Multiple Choice

Which of the following statements represents good advice prior to making capital expenditures?

• A)Capital expenditures represent borrowed funds that must be repaid in one year or less.It is important to seek the advice of your accountant prior to committing.
• B)Capital expenditures represent investment in inventories and expendable type assets that the firm will use in one year or less.It is important to maintain the appropriate level of monthly cash flow to pay for these expenditures.
• C)Most firms do not value capital expenditures on their balance sheets,so it is important to stay abreast of the market value of these assets at all times,in case you want to sell them.
• D)Capital expenditures are major investments - meaning they require large sums of funds.Companies should weight all possible options before committing available resources to projects that take significant amounts of funds and extended time.

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Definitions:

Horizontal Analysis

A method of financial assessment that involves examining past financial records across various reporting intervals to discern tendencies and patterns of growth.

Income Statements

Financial reports that outline the profits or losses of a company by detailing revenues and expenses over a particular period, also known as profit and loss statements.

Trial Balance

A trial balance is a bookkeeping report that lists the balances of all general ledger accounts of a company at a specific time, used to verify the equality of debits and credits.

Ledger

A book or collection of financial accounts where transactions are recorded, including credits and debits, typically categorized for easy tracking.