Certified Nurse Manager and Leader (CNML) Practice Test

What are Capital Expenses primarily associated with?

1. Recurring administrative costs

2. Long-term equipment or physical purchases

3. Employee training programs

4. Daily operational expenses

The correct answer is: Long-term equipment or physical purchases

Capital expenses are primarily associated with long-term investments in physical assets or equipment that a company acquires to enhance its operational capabilities. These expenditures are typically substantial and are expected to provide benefits over an extended period, often beyond one fiscal year. For example, when a healthcare organization purchases new medical equipment, expands its facilities, or invests in significant technology upgrades, these investments qualify as capital expenses because they are intended to increase the organization's capacity or improve service delivery over time. In contrast, recurring administrative costs, employee training programs, and daily operational expenses refer to regular, ongoing costs that are necessary for the routine functioning of an organization but do not involve long-term asset investment. Thus, while those categories are crucial for day-to-day operations, they do not fall under the definition of capital expenses.