Working capital in process industries Which of the following is a component of working capital investment for a chemical plant?

Introduction / Context:
Working capital is the money tied up in day-to-day operations. Correctly classifying costs as capital (fixed) versus working capital is essential for cash-flow planning and profitability analyses.

Given Data / Assumptions:

• Working capital includes items needed to run the plant: inventories, cash, and receivables.
• Fixed capital covers long-lived assets such as equipment and utilities plants.
• Depreciation is a non-cash expense.

Concept / Approach:
Maintenance and repair inventory (spare parts, consumables) is a current asset required to sustain operations and is part of working capital. Utilities plants and process equipment are part of fixed capital investment. Depreciation is an accounting expense reflecting the allocation of fixed capital cost over time and is not itself an investment in working capital.

Step-by-Step Solution:
List working capital components: raw material, WIP, finished goods, spares, cash, receivables.Identify which option is a current asset: maintenance and repair inventory (spares).Exclude utilities plants and process equipment (fixed capital) and depreciation (non-cash expense).

Verification / Alternative check:
Standard cost breakdowns (fixed vs. working capital) place spares within inventories under current assets.

Why Other Options Are Wrong:

• Utilities plants: fixed capital asset.
• Process equipment: fixed capital.
• Depreciation: accounting charge, not an asset or cash investment.

Common Pitfalls:

• Counting depreciation as an operational cash outlay (it is a non-cash expense affecting taxes).
• Misclassifying capital projects (utilities, equipment) as working capital.

Final Answer:
Maintenance and repair inventory (spares)