Final answer:
Capital expenditure includes long-term asset purchases like tools and ingredients for Arnold's cake decorating business.
Explanation:
Capital expenditure refers to the spending on assets that will provide benefits over an extended period. In the case of Arnold purchasing decorating tools and ingredients for his cake decorating company, both fall under the category of capital expenditures as they are long-term assets that will help generate future profits for his business.
- Examples of capital expenditures include buying machinery, equipment, buildings, or other long-lasting assets that contribute to the company's operations and growth.
- These expenditures are different from labor costs, which are associated with the workforce's wages and do not involve acquiring long-term assets.
- Understanding the distinction between different types of expenditures can help entrepreneurs make informed financial decisions for their businesses.
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