The change in net working capital when evaluating a capital budgeting decision is
A) the increase in current liabilities.
B) the change in current assets minus the change in current liabilities.
C) current assets minus current liabilities.
D) the increase in current assets.

Question

Quizplus · Accepted Answer

The change in net working capital is calculated as the change in current assets minus the change in current liabilities. This reflects the difference in cash flows related to the current assets and liabilities of the company over the time period of the capital budgeting decision. It is important to consider this change in net working capital when evaluating the overall cash flows and profitability of a capital budgeting project.

The Change in Net Working Capital When Evaluating a Capital