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 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 weigh all possible options before committing available resources to projects that take significant amounts of funds and extended time.

Question

Quizplus · Accepted Answer

In many organizations the purchase of major assets-such as land for future expansion, manufacturing plants to increase production capabilities, research to develop new-product ideas, and equipment to maintain or exceed current levels of output-is essential. Expanding into new markets, however, can be expensive with no guarantee of success. There is no guarantee that this investment will result in good returns for the firm. These investments must be thoroughly evaluated.

Which of the Following Statements Represents Good Advice Prior to Making