Chapter 6, Problem 5CQ

Summary Introduction

To identify: Whether, a firm would recover all of the working capital investment invested in a project, is a reasonable assumption or not and when this assumption might not be valid.

Working Capital:

Working capital is the capital that a business needs to complete on its day to day requirement and to operate its daily operations. It is the measurement tool to determine the company’s efficiency and short term finance needed by the company.

Formula to compute working capital,

$\text{Working capital = Current Assets }-\text{Current Liabilities}$