Question

Why do companies spend on research and development (R & D) ?

• A. To do business in a streamlined way.
• B. It is a pan of business.
• C. Change is a crucial pan of business.
• D. None of the above.

Answer 1

The correct option is A To do business in a streamlined way.

R&D is different from most activities performed by a corporation in the process of operation.

The research and/or development is typically not performed with the expectation or goal of immediate profit. Instead, it is focused on long-term profitability for a company.

Companies that employ entire departments devoted to R&D commit substantial capital to the effort.

They must estimate the risk-adjusted return on their R&D expenditures, which inevitably involve risk of capital, as no immediate payoff is experienced and the general return on investment is somewhat uncertain.

The level of capital risk increases as more is spent on R&D.