Question

A small company wishes to set up a fund that can be used for technology purchases over the next 6 years. What is the purpose of this fund?

1) To invest in new technology
2) To provide funding for employee training
3) To save money for future technology purchases
4) To donate to a technology charity

Answer 1

The small company's technology fund is intended to save money for future technology purchases, ensuring financial readiness for technology investments that will enhance operations and profitability.

Step-by-step explanation:

The purpose of a small company setting up a fund for technology purchases over the next 6 years is to save money for future technology purchases. This strategic approach allows the company to allocate financial resources towards the acquisition of essential technological assets that will presumably enhance operational efficiency and contribute to future profitability. By planning ahead and setting aside funds, the business is engaging in an investment strategy that capitalizes on financial assets in a disciplined manner.

Companies often face the challenge of needing to spend money now to earn profits later, such as buying long-lasting machines or starting research and development projects. They can raise necessary capital through various means like seeking early-stage investors, reinvesting profits, borrowing, or selling stock. By setting up a dedicated technology fund, the small company is creating a financial buffer to support technological advancements without the immediate need to seek external funding.