Investing in a new factory would affect ABC's balance sheet by increasing non-current assets, and financing could increase liabilities or equity depending on funding.

• A. The factory would decrease non-current assets regardless of funding.
• B. The factory would increase non-current assets, while financing it could increase liabilities or equity depending on funding.
• C. Financing would not affect liabilities or equity.
• D. The factory would only affect current assets.

Answer: (B)

When a company buys a factory, it adds a long-term asset, so non-current assets increase on the balance sheet. How that asset is financed determines where the claim on the assets comes from: if the purchase is funded by borrowing, liabilities rise; if it’s funded by issuing new shares or other equity funding, equity rises. In either case, the total assets increase by the same amount as the non-current asset, keeping the balance sheet balanced. The other ideas fail because a factory is a non-current asset, and financing choices do affect the liabilities or equity side depending on how the funds are raised.