Thinking as an Economist Would, Which Is True of Investment

question 211

Multiple Choice

Thinking as an economist would, which is true of investment?

• A) It is the portion of disposable income that is not used for consumption or saving.
• B) Investment represents spending on capital goods.
• C) Investment is putting money into stocks and bonds.
• D) Investment is a stock concept.

Understand the relevance of target and existing capital structure in raising capital.

Learn the significance of economic value added (EVA) in financial decision making.

Understand the concepts of book value and market value in capital structure and cost calculations.

Recognize how firms aim to maintain an optimal capital structure for financial stability and growth.

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Definitions:

Supply Functions

Mathematical expressions that describe how the quantity of goods or services offered by suppliers changes in response to price changes.

Demand Functions

Mathematical expressions that show the relationship between the quantity demanded of a good or service and its price.

Market Equilibrium

A condition in a market where the quantity supplied is equal to the quantity demanded at a certain price level.

Markup

The amount that retailers add on to the wholesale price of an item.