Capital budgeting is used to evaluate the purchase of:

• A. Office supplies for daily operations
• B. Long-term assets such as equipment or buildings
• C. Short-term marketable securities
• D. Inventory for resale within the next month

Answer: (B)

Verified step by step guidance

1. Understand the concept of capital budgeting: Capital budgeting is the process of evaluating and selecting long-term investments that are in line with the goal of maximizing the value of the firm. It focuses on decisions related to acquiring or upgrading long-term assets such as equipment, buildings, or machinery.
2. Identify the nature of the options provided: Analyze each option to determine whether it pertains to long-term investments or short-term operational needs.
3. Option 1: 'Office supplies for daily operations' - These are short-term operational expenses and not considered long-term investments. Therefore, they are not evaluated using capital budgeting.
4. Option 2: 'Long-term assets such as equipment or buildings' - These are long-term investments and are the primary focus of capital budgeting. This aligns with the purpose of capital budgeting.
5. Option 3: 'Short-term marketable securities' and Option 4: 'Inventory for resale within the next month' - Both of these are short-term assets and are not evaluated using capital budgeting. They are typically managed through working capital management.