DECA Marketing Cluster Practice Exam

What is the purpose of capital investment?

1. To pay off existing debts

2. To acquire fixed assets and further business objectives

3. To increase the number of employees

4. To purchase marketing services and ads

The correct answer is: To acquire fixed assets and further business objectives

The purpose of capital investment is primarily to acquire fixed assets and further business objectives. Capital investments typically refer to funds used by a company to purchase or upgrade physical assets such as buildings, machinery, equipment, and technology that are essential for business operations. These investments are crucial as they help the business to expand its capacity, improve efficiency, or enhance the quality of its products or services, ultimately driving growth and profitability. While paying off existing debts, increasing the number of employees, or purchasing marketing services and ads are all important business activities, they do not fall under the primary definition of capital investment. Paying off debts pertains to financial management rather than capital allocation, while increasing employee numbers and spending on marketing services are operational and marketing functions respectively. Capital investment specifically refers to long-term investments that contribute to the operational and strategic goals of the organization.