Which of these would NOT constitute investment:
a. someone buys 100 shares of Exxon-Mobil
b. Exxon-Mobile purchases 20 new oil rigs
c. General Motors builds a new assembly plant
d. Macy's remodels its stores
My answer was going to be d but my textbook tells me that buying shares does not constitute as investment until the company uses the funds to buy plant or equipment. Now I'm thinking that it would be b because remodeling may involve buying new display cases etc? Any help would be great, thanks!
To determine which option does not constitute investment, let's review the definition of investment. Investment refers to the purchase or acquisition of assets or resources, with the expectation of generating income or profit in the future.
Now let's examine each option:
a. Someone buys 100 shares of Exxon-Mobil: This can be considered an investment because shares represent ownership in a company, with the potential to earn dividends and capital gains.
b. Exxon-Mobile purchases 20 new oil rigs: This is indeed an investment. Exxon-Mobil is acquiring assets (oil rigs) that are expected to generate income or profit in the future through oil production.
c. General Motors builds a new assembly plant: This is also an investment. General Motors is investing in the construction of a physical facility (assembly plant) that will contribute to their production capacity and potential profitability.
d. Macy's remodels its stores: This option can be a bit more complex. While remodeling can involve purchasing new display cases or making other improvements, it does not necessarily constitute an investment in the traditional sense. Remodeling primarily aims to enhance the aesthetic appeal, functionality, or customer experience of existing stores. It is primarily an expense rather than an investment.
Therefore, the correct answer would be d. Macy's remodeling its stores does not typically qualify as investment, as it is more of an operating expense rather than an acquisition of assets intended to generate future income or profit.