Accountants Do Not Depreciate Investment in Net Working Capital Because

question 61

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 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:

Fair Value Hedge

A hedge of the exposure to changes in the fair value of an asset or liability, or an unrecognized firm commitment, that is attributable to a particular risk.

Thailand Bahts

The currency of Thailand, used as the standard monetary unit in the country.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Fair Hedge

A financial strategy used to reduce risk by taking offsetting positions in a security and its derivative, ensuring gains in one offset losses in the other.