Question
Which of the following increases liabilities but not assets? a. Taking out a loan to buy a new car b. Taking out a loan to go on vacation c. Using a credit card to buy a computer d. Paying off a student loan Please select the best answer from the choices provided
Ask by Bates French. in the United States
Mar 11,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
**b. Taking out a loan to go on vacation** increases liabilities without increasing assets.
Solution
To determine which option increases liabilities but not assets, let's analyze each choice:
a. **Taking out a loan to buy a new car**: This increases liabilities (the loan) and also increases assets (the car).
b. **Taking out a loan to go on vacation**: This increases liabilities (the loan) but does not increase assets, as a vacation does not result in a tangible asset.
c. **Using a credit card to buy a computer**: This increases liabilities (the credit card debt) and also increases assets (the computer).
d. **Paying off a student loan**: This decreases liabilities (the student loan) and does not affect assets.
From this analysis, the best answer is:
**b. Taking out a loan to go on vacation**.
This option increases liabilities without increasing assets.
Answered by UpStudy AI and reviewed by a Professional Tutor
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Simplify this solution Mind Expander
The best answer is b. Taking out a loan to go on vacation. This option increases your liabilities since you're incurring debt without acquiring a tangible asset in return; vacations are wonderful experiences but don’t have any lasting financial value. When it comes to managing liabilities effectively, it's crucial to differentiate between good debt and bad debt. Good debt generally leads to investments that can increase your wealth over time (like student loans or mortgages), while bad debt, like taking out a loan for a vacation, may only drain your finances without offering future benefits. Balance is key!
