Accountants Do Not Depreciate Investment in Net Working Capital Because

question 75

Multiple Choice

Accountants do not depreciate investment in net working capital because

• A)it is not a cash flow.
• B)it is recovered during or at the end of the project; thus it is not a depreciating asset.
• C)it is a sunk cost.
• D)working capital appears on the balance sheet, not the income statement.

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Definitions:

Corporation

A legal entity owned by shareholders, offering limited liability and existing independently of its owners.

Times Interest Earned

A financial metric indicating how many times a company's operating income can cover its interest expense, used to assess financial stability.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenues.

Interest Expense

The cost incurred by an entity for borrowed funds; interest expense is a non-operating cost shown on the income statement.