Question

Which of the following are examples of an incremental cash flow?

I.               An increase in net working capital.

II.              An increase in the cost of goods sold.

III. An increase in interest paid on bonds.

Select one:

A. I and II only

B. I, II, and III

C. I only

Answer 1

Incremental cash flow is an additional cash flow needed to fund a new project.

Hence for funding a new project increase in working capital, increase in cost of goods sold and increase in interest paid on bonds is part of incremental cash flow.

So answer is Option B)