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 a significant investment made by a company or organization in acquiring or upgrading long-term assets that are expected to provide benefits over an extended period. It involves spending on assets that are used in the production process or for generating income in the future.
Investment in new machinery by a factory is an example of a capital expenditure. It involves the purchase or upgrade of machinery or equipment that is essential for the production process and expected to provide long-term benefits, such as increased efficiency, productivity, or capacity.
