UPSC Previous Year Question | Prelims GS | 2022

With reference to the expenditure made by an organisation or a company, which of the following statements is/are correct? 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:

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2

Answer

Correct Answer

1 only

Explanation

Statement 1 is correct: acquiring new technology/assets is capital expenditure. Statement 2 is incorrect: debt repayment and equity financing are related to capital receipts/financing, not a capex-vs-revenue classification as stated.

Topics: capital expenditure, corporate finance, economy, technology acquisition