In Capital Budgeting Analysis, an Increase in Working Capital Can

question 47

Multiple Choice

In capital budgeting analysis, an increase in working capital can be shown as:

• A)A cash inflow at the beginning of the project
• B)An outflow at the beginning and an equal inflow at the end of the project
• C)An inflow at the beginning and an equal outflow at the end of the project
• D)A decrease in the initial amount invested

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Definitions:

Conditional Sales Contracts

Agreements that transfer the possession of goods from the seller to the buyer, but not legal ownership until certain conditions, typically final payment, are met.

Sale-on-approval

A transaction in which goods are delivered to a buyer with the understanding that the sale becomes final only if the buyer approves or is satisfied with the products.

Sale-or-return

A commercial arrangement where goods are delivered to a buyer who has the right to return the goods if they are not sold, within a stipulated period.

Voidable Title

A legal condition referring to a situation where a title or ownership can be invalidated at the discretion of one party due to certain conditions, such as fraud.