Which of the following is the most likely use of capital invested in a business?

• A. Donating to unrelated charities
• B. Paying personal expenses of the owner
• C. Investing in competitors' businesses
• D. Purchasing equipment and inventory

Answer: (D)

Verified step by step guidance

1. Understand the concept of capital investment: Capital invested in a business refers to the funds provided by owners or investors to support the operations and growth of the business. It is typically used for activities that directly contribute to the business's success and profitability.
2. Evaluate the options provided: Analyze each option to determine whether it aligns with the purpose of capital investment. For example, donating to unrelated charities and paying personal expenses of the owner do not contribute to the business's operations or growth.
3. Consider the relevance of investing in competitors' businesses: While investing in competitors might provide some strategic benefits, it is not a common or direct use of capital invested in one's own business. The focus should remain on activities that enhance the business itself.
4. Identify the correct use of capital: Purchasing equipment and inventory is a direct and essential use of capital invested in a business. Equipment is necessary for production or operations, and inventory is required for sales and revenue generation.
5. Conclude that purchasing equipment and inventory is the most likely use of capital invested in a business, as it directly supports the business's operations and growth objectives.