Question

2 - how organizations use funds

learning objective: distinguish between key elements of short-term and long-term expenses.

which of these options most accurately illustrates a short-term expense?

a.) paying a monthly utility bill

b.) investing in a companys research and development project

c.) purchasing a new warehouse

d.) buying a government bond

Explanation:

Define short-term expenses

Using the Role of Financial Management knowledge point

Short-term expenses (operating expenses) are routine, day-to-day costs required to run a business that are fully consumed within one year.

Analyze the given options

• a.) Paying a monthly utility bill: This is a recurring, routine operational cost consumed within a month, representing a short-term expense.
• b.) Investing in a company's research and development project: This is a long-term capital investment designed to generate future benefits over multiple years.
• c.) Purchasing a new warehouse: This is a capital expenditure on a fixed asset that provides utility over many years.
• d.) Buying a government bond: This is a long-term financial investment rather than an operational expense.

Select the correct option

Option (a) is the only choice that represents a routine, short-term operational expense.

Answer:

• a.) Paying a monthly utility bill (Correct answer)
• b.) Investing in a company's research and development project
• c.) Purchasing a new warehouse
• d.) Buying a government bond