The Change in Net Working Capital When Evaluating a Capital

question 69

Multiple Choice

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

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

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Definitions:

Rationale

The underlying reason or logic behind a decision, practice, or theory.

Parent Entities

Companies that own enough voting stock in another company to control management and operations by influencing or electing its board of directors.

Consolidated Financial Statements

Financial reports that aggregate the financials of a parent company and its subsidiaries into one comprehensive document.

Equity Method

An accounting technique used to assess investments in which the investor has significant influence over the investee but does not exert full control.