Net working capital:
A)can be ignored in project analysis because any expenditure is normally recouped at the end of the project.
B)requirements, such as an increase in accounts receivable, create a cash inflow at the beginning of a project.
C)is rarely affected when a new product is introduced.
D)can create either a cash inflow or a cash outflow at time zero of a project.
E)is the only expenditure where at least a partial recovery can be made at the end of a project.

Question

Quizplus · Accepted Answer

Net working capital can create either a cash inflow or a cash outflow at time zero of a project. This is because an increase in current assets (such as accounts receivable) or a decrease in current liabilities (such as accounts payable) will require cash to be put into the project. On the other hand, a decrease in current assets or an increase in current liabilities will create a cash inflow for the project. Therefore, net working capital needs to be considered in project analysis.

Net Working Capital