Management Notes

Reference Notes for Management

The expenses incurred on the setting up of the enterprise are called as ______________.

The expenses incurred on the setting up of the enterprise are called as ______________.


A. Cost of financing.
B. Cost of promotion.
C. Cost of fixed assets.
D. Cost of current assets.

The Correct Answer Is:

B. Cost of promotion.

The correct answer is B. Cost of promotion. When establishing a new enterprise, there are various expenses associated with introducing and marketing the business to the target audience. This includes costs related to advertising, public relations, and other promotional activities.

Correct Answer Explanation:

b. Cost of Production

The cost of promotion encompasses a wide range of expenses that are essential for creating awareness about the new enterprise. This includes expenses for advertising campaigns, creating a brand identity, designing promotional materials, and conducting marketing research. These costs are crucial for attracting potential customers and establishing a foothold in the market.

Additionally, the cost of promotion also covers expenses related to public relations efforts. This may involve hiring public relations professionals, organizing events, and managing media relations to enhance the visibility and reputation of the enterprise.

In summary, the cost of promotion is a fundamental component of the initial expenses incurred when setting up an enterprise. It plays a critical role in ensuring that the business gains the attention and trust of its target audience.

Why the Other Options are Incorrect:

A. Cost of Financing:

The cost of financing encompasses the expenses related to obtaining and managing the financial resources needed to start and operate the enterprise. This includes interest on loans, fees for financial advisors, and other financial management costs. While financing is undeniably crucial for any business, it primarily deals with the monetary aspects and does not directly pertain to the expenses associated with promoting the business.

For instance, if a company takes out a loan to purchase machinery or hire staff, the interest paid on that loan would be considered part of the cost of financing. This is distinct from the costs incurred in advertising, creating a brand, or conducting promotional events, which are covered by the cost of promotion.

C. Cost of Fixed Assets:

The cost of fixed assets includes expenses related to acquiring physical assets like machinery, equipment, land, and buildings. These assets are essential for the operation of the enterprise and provide the infrastructure necessary for production or service delivery. However, these costs are distinct from those associated with promotional activities.

For example, if a manufacturing company invests in a production facility, the expenses incurred for purchasing and setting up the machinery, constructing the facility, and acquiring the land would be part of the cost of fixed assets. This is different from the expenses incurred in marketing campaigns, brand development, and other promotional efforts.

D. Cost of Current Assets:

Current assets refer to the short-term resources that a business requires for its day-to-day operations. This includes inventory, accounts receivable, and cash. These assets are crucial for maintaining liquidity and ensuring smooth operations. However, like the other options, they do not directly relate to the expenses associated with promoting the business.

For example, if a retail business invests in inventory to stock its shelves, the expenses incurred for purchasing that inventory and managing accounts receivable would be part of the cost of current assets. Again, this is separate from the costs incurred in marketing and promotional activities.

In summary, while all of these categories of expenses are essential for various aspects of setting up and running an enterprise, they do not specifically address the costs associated with promoting or marketing the business. The cost of promotion is distinct in that it specifically covers expenses related to advertising, public relations, and other promotional activities aimed at attracting customers and establishing a presence in the market.

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