The process of planning and managing a ﬁrm's Long-term investments is called:
A) Working capital management.
B) Financial depreciation.
C) Agency cost analysis.
D) Capital budgeting.
E) Capital structure.

Question

Quizplus · Accepted Answer

Capital budgeting involves planning and managing a firm's long-term investments in order to create value for shareholders. It involves analyzing potential investment projects and deciding which ones to pursue based on factors such as expected returns, risk, and impact on the company's overall strategy. Working capital management (A) focuses on short-term assets and liabilities, such as inventory and accounts payable. Financial depreciation (B) is not a commonly used term, and agency cost analysis (C) is a broader concept related to the costs that can arise when the interests of a company's management and shareholders are not aligned. Capital structure (E) is the mix of debt and equity financing a company uses to fund its operations, which is also an important financial decision but not directly related to long-term investments.

The Process of Planning and Managing a ﬁRm's Long-Term Investments