Which of the Following Statements Regarding Investment in Working Capital

question 94

Multiple Choice

Which of the following statements regarding investment in working capital is incorrect?

• A)investment in working capital, unlike investment in plant and equipment, represents a positive cash flow.
• B)the cash flow is measured by the change in working capital, not the level of working capital.
• C)the working capital may change during the life of the project.
• D)working capital is recovered at the end of the project.

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Definitions:

Prevention Cost

Costs incurred to prevent defects in products or services, including training, quality control, and equipment maintenance.

Internal Failure Cost

Costs associated with defects found before a product or service is delivered to the customer, such as scrap and rework expenses.

Value-Added Activity

An activity that is needed to meet customer requirements.

Preventive Maintenance

Preventive maintenance involves regularly scheduled inspections, service, and repairs of equipment and facilities to prevent unexpected breakdowns and extend their useful life.