Net Working Capital

question 26

Multiple Choice

Net working capital:

• A) can be ignored in project analysis because any expenditure is normally recouped at the end of the project.
• B) requirements, such as an increase in accounts receivable, create a cash inflow at the beginning of a project.
• C) is rarely affected when a new product is introduced.
• D) can create either an initial cash inflow or outflow.
• E) is the only expenditure where at least a partial recovery can be made at the end of a project.

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Definitions:

Semi-annual Deposits

Deposits that are made twice a year into a financial account.

Retirement Fund

Financial resources that have been saved or accumulated to support a person's living expenses after they cease working.

Compounded Annually

Interest calculation method where the profit earned is added to the principal annually, enhancing the subsequent year's earnings.

Nominal Interest

The stated interest rate on a loan or investment, not accounting for inflation or compounding effects.