Accruals are "free" capital in the sense that no explicit interest must be paid on accruals.

Question

Quizplus · Accepted Answer

Accruals are considered free capital because they represent the accumulation of funds that a company has earned but has not yet paid out as expenses or dividends. Unlike debt or equity financing, there is no explicit interest or dividend payment associated with accruals. However, there is an opportunity cost associated with using accruals, as the company could choose to invest those funds elsewhere to generate a return.

Accruals Are "Free" Capital in the Sense That No Explicit