1. Acquiring new technology is capital expenditure.
2. Debt financing is considered capital expenditure, while equity financing is considered revenue expenditure.
Select the correct answer using the code given below:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Ans: a
Explanation:
A capital expenditure (“CapEx” for short) is the payment with either cash or credit to purchase long-term physical or fixed assets used in a business’s operations and are considered an investment by a company in expanding its business.
CapEx is important for companies to grow and maintain their business by investing in new property, plant, equipment (PP&E), products, and technology.
Debt: Refers to issuing bonds to finance the business.
Equity: Refers to issuing stock to finance the business.
Debt and equity financing does not involve any expenditure.
Hence, statement 1 is correct & statement 2 is incorrect.
Read: Solved Economy PYQs With Explanation 2022 UPSC Prelims