Capital Expenditure MCQs
Which of the following best defines capital expenditure?
a) Expenditure on day-to-day operations
b) Expenditure on acquiring long-term assets
c) Expenditure on advertising and promotional activities
d) Expenditure on employee salaries and wages
Answer: b) Expenditure on acquiring long-term assets
Which of the following is an example of a capital expenditure?
a) Purchasing office supplies
b) Paying rent for office space
c) Buying a new manufacturing machine
d) Paying utility bills
Answer: c) Buying a new manufacturing machine
Capital expenditures are typically:
a) Incurred once and not recurring
b) Incurred on a regular basis
c) Incurred for short-term projects
d) Incurred for daily operational expenses
Answer: a) Incurred once and not recurring
Which of the following is a characteristic of capital expenditures?
a) They are deducted from taxable income
b) They are recorded as expenses on the income statement
c) They are typically financed through short-term loans
d) They increase the value of an asset or improve its useful life
Answer: d) They increase the value of an asset or improve its useful life
Capital Expenditure MCQs with Answers
Which financial statement reflects the impact of capital expenditures?
a) Balance sheet
b) Income statement
c) Cash flow statement
d) Statement of retained earnings
Answer: a) Balance sheet
Which of the following is not considered a capital expenditure?
a) Renovating a company’s office building
b) Upgrading computer software
c) Repairing a broken piece of equipment
d) Constructing a new warehouse
Answer: c) Repairing a broken piece of equipment
How are capital expenditures typically funded?
a) Through revenue generated from day-to-day operations
b) Through short-term loans from financial institutions
c) Through the issuance of bonds or stock offerings
d) Through the company’s retained earnings or savings
Answer: d) Through the company’s retained earnings or savings
What is the purpose of capital budgeting?
a) To allocate funds for daily operational expenses
b) To determine the company’s annual revenue targets
c) To evaluate and select investment projects
d) To calculate the company’s profit margin
Answer: c) To evaluate and select investment projects
Capital Expenditure MCQs with Answers
Which of the following factors is important in assessing a capital expenditure project?
a) Projected increase in daily operational expenses
b) Impact on short-term revenue generation
c) Return on investment and payback period
d) Ability to reduce employee turnover
Answer: c) Return on investment and payback period
Which financial metric is commonly used to evaluate the profitability of a capital expenditure project?
a) Gross profit margin
b) Return on assets
c) Earnings per share
d) Net present value
Answer: d) Net present value
Which of the following is an example of a capital expenditure in the healthcare industry?
a) Purchasing medical supplies
b) Paying salaries for nurses
c) Building a new hospital wing
d) Marketing and advertising expenses
Answer: c) Building a new hospital wing
Capital expenditures are typically associated with which type of assets?
a) Intangible assets
b) Current assets
c) Fixed assets
d) Financial assets
Answer: c) Fixed assets
Capital Expenditure MCQs with Answers
How are capital expenditures treated for tax purposes?
a) They are fully deductible in the year of expenditure
b) They are not deductible for tax purposes
c) They are depreciated over their useful life
d) They are subject to a fixed tax rate
Answer: c) They are depreciated over their useful life
Which financial ratio helps assess a company’s ability to fund its capital expenditures?
a) Current ratio
b) Debt-to-equity ratio
c) Return on investment ratio
d) Cash flow coverage ratio
Answer: d) Cash flow coverage ratio
Which of the following is an example of a capital expenditure for a retail company?
a) Hiring seasonal employees
b) Renovating store displays
c) Paying utility bills
d) Ordering inventory
Answer: b) Renovating store displays
What is the main objective of capital expenditure analysis?
a) Minimizing the company’s tax liability
b) Maximizing short-term profitability
c) Enhancing the company’s image and brand
d) Evaluating the financial viability of investment projects
Answer: d) Evaluating the financial viability of investment projects
Capital Expenditure MCQs with Answers
How does a capital expenditure differ from a revenue expenditure?
a) Revenue expenditures are tax-deductible, while capital expenditures are not.
b) Revenue expenditures are recurring expenses, while capital expenditures are one-time investments.
c) Revenue expenditures are typically funded through retained earnings, while capital expenditures are funded through loans.
d) Revenue expenditures increase the value of assets, while capital expenditures do not.
Answer: b) Revenue expenditures are recurring expenses, while capital expenditures are one-time investments.
Which financial statement reflects the impact of capital expenditures on a company’s cash flow?
a) Income statement
b) Balance sheet
c) Statement of cash flows
d) Statement of retained earnings
Answer: c) Statement of cash flows
Which of the following is an example of a capital expenditure in the transportation industry?
a) Fuel and maintenance costs for vehicles
b) Employee training expenses
c) Purchasing new delivery trucks
d) Advertising and marketing campaigns
Answer: c) Purchasing new delivery trucks
How do capital expenditures affect a company’s financial position?
a) They increase liabilities and decrease assets.
b) They increase assets and decrease liabilities.
c) They have no impact on the company’s financial position.
d) They decrease both assets and liabilities.
Answer: b) They increase assets and decrease liabilities.
Capital Expenditure MCQs with Answers
Which of the following is an example of a capital expenditure in the technology industry?
a) Paying salaries for software developers
b) Upgrading computer servers
c) Renting office space
d) Conducting market research
Answer: b) Upgrading computer servers
What is the primary goal of capital expenditure management?
a) Maximizing short-term revenue
b) Minimizing operational expenses
c) Optimizing long-term profitability
d) Reducing employee turnover
Answer: c) Optimizing long-term profitability
How are capital expenditures financed through debt typically classified on the balance sheet?
a) As current liabilities
b) As long-term liabilities
c) As equity
d) As prepaid expenses
Answer: b) As long-term liabilities
Which financial metric helps measure the efficiency of capital expenditures?
a) Return on investment (ROI)
b) Gross profit margin
c) Earnings per share (EPS)
d) Current ratio
Answer: a) Return on investment (ROI)
Capital Expenditure MCQs with Answers
Which of the following is an example of a capital expenditure for a construction company?
a) Purchasing construction materials
b) Hiring temporary laborers
c) Paying subcontractors
d) Acquiring heavy machinery
Answer: d) Acquiring heavy machinery
How do capital expenditures impact a company’s depreciation expense?
a) Capital expenditures reduce depreciation expense.
b) Capital expenditures increase depreciation expense.
c) Capital expenditures have no effect on depreciation expense.
d) Capital expenditures replace depreciation expense.
Answer: b) Capital expenditures increase depreciation expense.
What is the key difference between capital expenditures and operating expenditures?
a) Capital expenditures are tax-deductible, while operating expenditures are not.
b) Capital expenditures are long-term investments, while operating expenditures are day-to-day expenses.
c) Capital expenditures are recorded on the income statement, while operating expenditures are recorded on the balance sheet.
d) Capital expenditures increase assets, while operating expenditures decrease assets.
Answer: b) Capital expenditures are long-term investments, while operating expenditures are day-to-day expenses.
Which financial analysis technique is commonly used to evaluate the profitability of capital expenditure projects?
a) Net present value (NPV)
b) Return on investment (ROI)
c) Break-even analysis
d) Cost-volume-profit analysis
Answer: a) Net present value (NPV)
Capital Expenditure MCQs with Answers
Which of the following is an example of a capital expenditure in the energy sector?
a) Paying utility bills
b) Conducting safety training programs
c) Upgrading power generation equipment
d) Investing in renewable energy credits
Answer: c) Upgrading power generation equipment
How do capital expenditures affect a company’s future cash flows?
a) They decrease future cash flows due to increased expenses.
b) They increase future cash flows due to higher revenue generation.
c) They have no direct impact on future cash flows.
d) They can have both positive and negative effects on future cash flows depending on the project’s success.
Answer: d) They can have both positive and negative effects on future cash flows depending on the project’s success.
Which of the following is an example of a capital expenditure in the manufacturing industry?
a) Paying employee salaries
b) Ordering raw materials
c) Upgrading production machinery
d) Renting a warehouse space
Answer: c) Upgrading production machinery
How are capital expenditures typically accounted for on the income statement?
a) As operating expenses
b) As non-operating expenses
c) As cost of goods sold
d) As depreciation expense
Answer: d) As depreciation expense
Capital Expenditure MCQs with Answers
Which financial ratio helps assess the efficiency of capital utilization?
a) Return on equity (ROE)
b) Debt ratio
c) Asset turnover ratio
d) Gross profit margin
Answer: c) Asset turnover ratio
Which of the following is an example of a capital expenditure for a restaurant?
a) Purchasing ingredients for menu items
b) Hiring waitstaff
c) Renovating the dining area
d) Running marketing campaigns
Answer: c) Renovating the dining area
What is the main purpose of conducting a post-implementation review of a capital expenditure project?
a) To identify cost overruns
b) To evaluate the project’s return on investment
c) To assess the impact on employee morale
d) To determine the project’s impact on the environment
Answer: b) To evaluate the project’s return on investment
How do capital expenditures affect a company’s financial leverage?
a) They increase financial leverage due to increased debt financing.
b) They decrease financial leverage by reducing debt levels.
c) They have no direct impact on financial leverage.
d) They can impact financial leverage depending on the funding source.
Answer: a) They increase financial leverage due to increased debt financing.
Capital Expenditure MCQs with Answers
Which financial statement provides information about a company’s historical capital expenditures?
a) Income statement
b) Balance sheet
c) Cash flow statement
d) Statement of changes in equity
Answer: c) Cash flow statement
Which of the following is an example of a capital expenditure in the hospitality industry?
a) Paying hotel staff wages
b) Purchasing linens and toiletries
c) Renovating hotel rooms
d) Running social media advertising campaigns
Answer: c) Renovating hotel rooms
How do capital expenditures impact a company’s return on assets (ROA)?
a) They decrease ROA by reducing asset values.
b) They increase ROA by generating higher revenue.
c) They have no direct impact on ROA.
d) They can impact ROA depending on the profitability of the investment project.
Answer: d) They can impact ROA depending on the profitability of the investment project.
Which of the following is an example of a capital expenditure for a telecommunications company?
a) Paying employee benefits
b) Upgrading network infrastructure
c) Renting office space
d) Conducting customer satisfaction surveys
Answer: b) Upgrading network infrastructure
Capital Expenditure MCQs with Answers
Which of the following is an example of a capital expenditure in the education sector?
a) Hiring teaching assistants
b) Purchasing textbooks
c) Constructing a new school building
d) Conducting professional development workshops
Answer: c) Constructing a new school building
How are capital expenditures financed through equity typically classified on the balance sheet?
a) As current liabilities
b) As long-term liabilities
c) As equity investments
d) As prepaid expenses
Answer: c) As equity investments
Which financial ratio helps evaluate the financial stability of a company after capital expenditures?
a) Current ratio
b) Debt-to-equity ratio
c) Return on investment ratio
d) Gross profit margin
Answer: b) Debt-to-equity ratio
Which of the following is an example of a capital expenditure for a transportation company?
a) Paying fuel expenses
b) Hiring drivers
c) Upgrading vehicle fleet
d) Conducting customer satisfaction surveys
Answer: c) Upgrading vehicle fleet
Capital Expenditure MCQs with Answers
How do capital expenditures impact a company’s cash flow statement?
a) They increase cash flow from operations.
b) They decrease cash flow from investing activities.
c) They have no direct impact on the cash flow statement.
d) They can impact cash flow depending on the financing method.
Answer: b) They decrease cash flow from investing activities.
What is the primary objective of a capital expenditure budget?
a) To allocate funds for day-to-day expenses
b) To track revenue and expenditure trends
c) To forecast short-term profitability
d) To plan and control investment in long-term assets
Answer: d) To plan and control investment in long-term assets
Which financial metric is commonly used to assess the profitability of a capital expenditure project over its entire life cycle?
a) Payback period
b) Internal rate of return (IRR)
c) Return on investment (ROI)
d) Earnings per share (EPS)
Answer: b) Internal rate of return (IRR)
Which of the following is an example of a capital expenditure in the agriculture industry?
a) Purchasing seeds and fertilizers
b) Paying farm laborers
c) Repairing irrigation systems
d) Running advertising campaigns
Answer: c) Repairing irrigation systems
Capital Expenditure MCQs with Answers
How do capital expenditures impact a company’s asset turnover ratio?
a) They decrease the asset turnover ratio.
b) They increase the asset turnover ratio.
c) They have no direct impact on the asset turnover ratio.
d) They can impact the asset turnover ratio depending on the nature of the investment.
Answer: c) They have no direct impact on the asset turnover ratio.
Which financial statement provides information about the funding sources used for capital expenditures?
a) Income statement
b) Balance sheet
c) Cash flow statement
d) Statement of changes in equity
Answer: b) Balance sheet