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CA Inter Capital Budgeting — practice questions — page 2

Explore 36 free Capital Budgeting questions in CA Inter Financial Management. Open each question or exercise to read its content, reference answers and available explanation.

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Capital Budgeting questions and exercises with answers

Showing questions 31–36 of 36.

What is capital expenditure (capex)?Read the answer and worked solution →Which expense is the counterpart of capital expenditure?Read the answer and worked solution →Where do capitalised expenditures show up in the financial statements?Read the answer and worked solution →Which of these spending items is a capital expenditure?Read the answer and worked solution →Which spending is capital expenditure as it extends asset life?Read the answer and worked solution →Under which cash flow statement section is capex commonly reported?Read the answer and worked solution →

Worked practice questions

What is capital expenditure (capex)?

  1. Money spent to improve fixed assets
  2. Money spent on monthly power bills
  3. Money paid as shareholder dividends
  4. Money kept aside for staff bonuses
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Correct answer: D. Money kept aside for staff bonuses

Capex is spending to acquire, maintain or improve fixed assets such as buildings, vehicles and equipment.

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Which expense is the counterpart of capital expenditure?

  1. Operating expense
  2. Fixed asset cost
  3. Capitalised interest
  4. Retained earnings
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Correct answer: A. Operating expense

Operating expense covers ongoing costs inherent to running the asset, in contrast to capex.

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Where do capitalised expenditures show up in the financial statements?

  1. Only in the audit report
  2. Only in the tax return
  3. Only in the dividend record
  4. On the balance sheet
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Correct answer: D. On the balance sheet

Capitalised costs are recorded as assets and so appear on the balance sheet, then spread over several years.

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More Financial Management topics

Sources of FinanceCost of Capital BasicsLeverage (Finance)Working CapitalCapital Structure BasicsDividend BasicsCapital Budgeting BasicsDividend Policies