Discussion
Consider the following pairs of cost item and its category:
Process equipment - Fixed capital
Raw material stocks - Working capital
Buildings and installation - Fixed capital
Depreciation - Working capital
How many of the pairs given above are correctly matched?
Answer: A
Correct answer: Only three
Equipment, buildings and installation are all fixed capital, and raw material stocks are working capital - three correct. The fourth is wrong: depreciation is neither. It is an accounting charge that writes down the fixed capital over time, not a category of capital employed.
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