Question : Which of the following is an example of a capital expenditure?
Option 1: Purchase of groceries by a household
Option 2: Payment of salaries by a company
Option 3: Investment in new machinery by a factory
Option 4: Payment of rent by a tenant
Correct Answer: Investment in new machinery by a factory
Solution : The correct answer is (c) Investment in new machinery by a factory.
A capital expenditure refers to an investment made by a business or organization in long-term assets that are expected to generate income or benefits over an extended period. It involves the acquisition, improvement, or expansion of capital goods or fixed assets.
Investment in new machinery by a factory represents a capital expenditure. This is because the purchase of machinery is considered a long-term investment that enhances the production capacity of the factory and is expected to generate economic benefits over time.
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