The Change in Net Working Capital When Evaluating a Capital

question 14

Multiple Choice

The change in net working capital when evaluating a capital budgeting decision is

• A) the change in current assets minus the change in current liabilities.
• B) the change in current liabilities minus the change in current assets.
• C) the increase in current liabilities.
• D) the increase in current assets.

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Definitions:

Useful Life

The estimated period over which an asset is expected to be utilizable or productive before it is fully depreciated.

Straight-Line

A method of calculating depreciation or amortization by evenly distributing the cost over an asset's useful life.

Double-Declining-Balance

A method of accelerated depreciation where the asset's book value is decreased at double the rate of straight-line depreciation.

Units-Of-Activity

A depreciation method that allocates expense based on the actual usage or activity level of the asset.