The change in net operating working capital is always positive, meaning more working capital is required for projects considered in capital budgeting because all projects are either expansion projects or replacement projects which have expansion effects.

Question

Quizplus · Accepted Answer

The change in net operating working capital can be positive or negative depending on the cash flows associated with the project. While expansion projects may require more working capital, replacement projects may not necessarily require additional working capital.

The Change in Net Operating Working Capital Is Always Positive