Entrepreneurship and Small Business (ESB) Certification Practice Exam

Which of the following is a potential startup cost for a new business?

1. Annual vendor expenses

2. Equipment purchases

3. Utility expenses

4. Rent for office space during operation

The correct answer is: Equipment purchases

Equipment purchases are a potential startup cost for a new business because they typically represent a significant initial investment required to get the business up and running. These purchases may include machinery, tools, computers, or any other necessary items that facilitate the main functions of the business. Startup costs are defined as the expenses that a new business incurs before it starts generating revenue. Equipment directly relates to this phase, as businesses often need essential tools and facilities in place to operate effectively from the outset. While other expenses like annual vendor expenses, utility expenses, and rent for office space are important, they are generally categorized as ongoing operational costs rather than startup costs. These ongoing costs continue to accumulate after the business has launched, whereas equipment purchases are usually one-time initial investments needed before the business can start its activities.