A long-term financial commitment to purchase or upgrade equipment is best described by which term?

• A. Budget
• B. Capital Expenditures
• C. Quick Ratio
• D. Forecast

Answer: (B)

Spending to acquire or upgrade equipment that will be used for many years is captured as capital expenditures. CapEx records a long-term asset on the balance sheet and tracks its cost over time through depreciation, reflecting the idea that the expenditure adds lasting value beyond the current year. This distinguishes it from ordinary operating costs, which are expensed in the period they’re incurred.

Budget, in contrast, is simply a plan for expected income and spending. Quick ratio is a liquidity measure that compares easily convertible assets to current liabilities and has no connection to asset purchases. Forecast refers to projections of future performance, not a concrete, long-term investment decision.