Capital budgeting projects that expand sales are more likely to involve increases in working capital than are projects that involve the replacement of existing assets.

Question

Quizplus · Accepted Answer

Projects that expand sales require additional funds to support the increase in sales volume, so they are more likely to involve increases in working capital such as accounts receivable, inventory, and accounts payable management. On the other hand, projects involving the replacement of existing assets may not require significant changes in working capital.

Capital Budgeting Projects That Expand Sales Are More Likely to Involve