Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What term describes technological advancements in production processes that save on capital?

1. Labour savings

2. Capital savings

3. Neutral advancements

4. Efficiency improvements

The correct answer is: Capital savings

The term that describes technological advancements in production processes that save on capital is capital savings. This concept refers specifically to innovations or improvements that reduce the amount of capital required to produce goods or services. When production processes are optimized or modernized, companies can often use less machinery, reduce the need for large investments in facilities, or implement technology that minimizes financial outlay without compromising production quality. In contrast, while labour savings refers to advancements that reduce labor costs, this question specifically addresses capital. Neutral advancements suggest that the technology does not favor either labor or capital, which is not the main focus here. Efficiency improvements could encompass a broader range of enhancements but do not specifically target capital reduction; they could relate to improvements in time, energy use, or even labor productivity without necessarily leading to capital savings. Thus, the focus on advancements that specifically save on capital accurately identifies the concept as capital savings.