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Checking answer, I'm really not sure what should be included in this type of question. Why...

Checking answer, I'm really not sure what should be included in this type of question. Why do we include the accumulated investment in net working capital as a cash inflow at the end of a project?

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Answer #1

Working capital is basically Current Assets-Current Liabilities

Current assets consists of receivables, inventory etc.

Current liabilities consists of payables(or creditors), etc.

When you require working capital investment it means you have to fund the inventory purchase and the debtors by trying to partially offset against creditors

When the project gets completed, you will sell your inventory, collect cash from debtors pay all creditors and hence there will be cash inflow

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