Question

Manager Bob oversees the operation of a cotton ginning facility in South Texas. One of the gins is 30+ years old and needs to be phased out, this represents which of the following types of investment?

Answer 1

The answer is: Reinvested income

Step-by-step explanation:

Generally when a company will invest in replacing a fixed asset (new machinery or factories, office renovations, new vehicles, etc.) it reinvests income. It can also do it by getting a loan (or bonds) or issuing new stock, but most companies will prefer the first option.

Reinvested income (or retained earnings) are earnings from your company´s operations that you use to keep your business running and competitive. Usually a company will not spend all its profit on bonuses and dividends, it usually retains a part to reinvest in the company´s operations.