Final answer:
The purchase of materials for production is not considered a capital investment, which is characterized by expenditure on long-term assets like equipment and facilities. The assertion in the question is false. Capital investment usually refers to the purchase of capital goods and the raising of funds for significant growth or expansion efforts.
Step-by-step explanation:
The purchase of a large amount of materials to be used in production is not considered a capital investment. The statement is FALSE. Capital refers to factors of production that are used in the creation of goods and services, such as office buildings, machinery, and tools. Materials used in production are typically categorized as inventory, not capital investment. Capital investment involves expenditures on assets that will provide benefits over a long period, such as equipment or facilities. Therefore, buying materials is an operational expense and is not characterized as a capital investment.
When we talk about capital in the context of production, we often refer to investments made to purchase capital goods, like new equipment or expanding facilities, which businesses require to increase capacity, especially when they anticipate higher profits and consumer demand. For instance, in a situation where a firm must raise funds in the financial market, it's typically for capital investments that have a lasting impact on production capabilities, not for day-to-day materials.