Changes in the net working capital: A. can affect the cash flows of a project every year of the project's life. B. only affect the initial cash flows of a project. C. are included in project analysis only if they represent cash outflows. D. are generally excluded from project analysis due to their irrelevance to the total project. E. affect the initial and the final cash flows of a project but not the cash flows of the middle years.

Question

Deshawn Shelton

Business

6 August, 15:45

Changes in the net working capital: A. can affect the cash flows of a project every year of the project's life. B. only affect the initial cash flows of a project. C. are included in project analysis only if they represent cash outflows. D. are generally excluded from project analysis due to their irrelevance to the total project. E. affect the initial and the final cash flows of a project but not the cash flows of the middle years.

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Answers (1)

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Rowan Bullock · Answer 1

A. can affect the cash flows of a project every year of the project's life.

Explanation:

Working capital can be defined as the operating liquidity that is used by organisations and businesses for its operations.

Working capital is calculated as current assets less current liabilities. So it determines the cash flow that is used in projects.

A company may have assets that is not easily converted to cash, they will have low level of working capital. Positive working capital is when a business has sufficient liquid assets to meet short te obligations and continue its normal operations.