What is the difference between invested capital and spontaneous liabilities?
A)The firm knows who invests capital in the firm, but not the identity of who the firm owes its spontaneous liabilities.
B)Invested capital is randomly determined, so the corresponding liabilities must be spontaneous and therefore also random.
C)Invested capital is the amount of equity invested in the firm, while spontaneous liabilities are the sum of long-term and short-term debt.
D)Invested capital is the result of investor decisions while spontaneous liabilities arise from the firm's business operations.

Question

Quizplus · Accepted Answer

Invested capital refers to the amount of funding that a company receives from investors, such as through issuing shares or taking out loans. Spontaneous liabilities, on the other hand, arise from the company's normal business operations, such as accounts payable or accrued expenses. They are not the result of deliberate investor decisions but rather everyday transactions and obligations. Therefore, the correct answer is D.

What Is the Difference Between Invested Capital and Spontaneous Liabilities