If a project permits a reduction in the level of working capital, this reduction is assumed to increase cash flows.

Name: If a project permits a reduction in the level of working capital, this reduction is assumed to increase cash flows.
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Quizplus · Accepted Answer

A reduction in the level of working capital means that less cash is tied up in current assets such as inventory and accounts receivable. This decreases the amount of cash that a company needs to maintain its operations, resulting in an increase in cash flows.

If a Project Permits a Reduction in the Level of Working