Question

Which of the following is not an example of a capital budgeting decision?

a. Whether a firm should purchase a new building.

b. Whether a firm should hire a company to deliver its product or whether a firm should have its own delivery service.

c. Whether a firm should open a new location.

d. Whether a firm should purchase from suppliers on credit.

Answer 1

Capital budgeting decision involves spending on long-term capital assets such as purchasing a building, hiring a delivery company, or opening a new location.

All of these examples involve spending on assets that have a life of more than one year.

So, options a,b, and c are incorrect because they are all an example of capital budgeting decision.

Option d is correct because the decision to purchase from suppliers on credit is a decision on managing the working capital, not long-term assets

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