Question

Many projects require investments in inventory and accounts receivable that are then partially or fully recovered...

Many projects require investments in inventory and accounts receivable that are then partially or fully recovered at the end of the project. What is this referred to? Select one: a. Working capital. b. Transitory items. c. Accounting items. d. Salvage value. e. Sunk costs.

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Answer #1

Answer a) Working Capital

Explanation:

When you start a project, you require funds to finance the working capital which is specific to that project. Hence you add the working capital requirement in the initial outlay calculation.

At the end of the project, the working capital you invested at the inception is no longer required as it was specific to the project.

Hence the same is recovered at the end of the project as by doing so we get to the correct cash flow from the project.

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