When a firm uses profits to purchase new capital equipment, it is engaging in

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Reinvestment refers to the use of a company's profits to invest in the growth of the business, such as purchasing new capital equipment or expanding operations. This is a common way for firms to fund their growth without the need for external financing, and can lead to increased efficiency and profitability in the long-term. Tax evasion is illegal and unrelated to reinvestment, while balance sheet accounting is a way of measuring a company's financial position and not a specific action. Using profits to purchase capital equipment can be risky if the investment does not generate a sufficient return, but it is not the most risky way a firm can obtain investment funds.

When a Firm Uses Profits to Purchase New Capital Equipment