Which of the Following Is True About Initial Working-Capital Investment

question 102

Multiple Choice

Which of the following is true about initial working-capital investment?

• A)Initial investments in plant and equipment are usually accompanied by additional investments in working capital.
• B)Initial investments in plant and equipment are never accompanied by additional investments in working capital.
• C)Additional investments in working-capital investments are never in the form of a current asset.
• D)Investments in initial machines occur at the end of the product's life.
• E)Initial investments exclude cash assets.

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Definitions:

Operating Income

The profit realized from a business's operations after deducting operating expenses such as wages and cost of goods sold.

Contribution Format

A type of income statement that separates fixed and variable costs to highlight the contribution margin.

Unit Contribution Margin

The amount that each unit sold contributes towards covering fixed costs and generating profit, calculated as the selling price per unit minus variable costs per unit.

Break-even Point

The level of sales or production at which total revenues equal total expenses, resulting in neither profit nor loss.