ACCA Applied Skills Practice Questions — All Questions

Working capital is defined as:

• a.Current assets minus current liabilities✓
• b.Total equity
• c.Non-current assets
• d.Long-term debt

Working capital = current assets - current liabilities.

Under the NPV investment rule, a project is accepted if its NPV is:

• a.Equal to the payback
• b.Negative
• c.Zero always rejected
• d.Positive✓

Positive-NPV projects increase shareholder value.

Discounting future cash flows reflects the principle that:

• a.Inflation is irrelevant
• b.Profits equal cash
• c.Money has time value✓
• d.Cash never changes value

Discounting applies the time value of money to future cash flows.