Which of the following statements regarding investment in working capital is incorrect?
A) An investment in working capital, unlike an investment in plant and equipment, represents a positive cash flow when the investment is made.
B) Net working capital cash flow is measured by the change in working capital, not the level of working capital.
C) Net working capital may change during the life of a project.
D) Working capital is generally recovered at the end of a project.

Question

Quizplus · Accepted Answer

An investment in working capital represents a negative cash flow when it is made, as it requires a cash outflow to finance current assets such as inventory and accounts receivable. On the other hand, an investment in plant and equipment may represent a positive cash flow if it allows for increased efficiency or productivity.

Which of the Following Statements Regarding Investment in Working Capital