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Write a essay on capital budgeting minimum 500 words |
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Answer» budgeting is a way to evaluate and compare significant potential investments and expenses in order to decide which ones are most important.In capital budgeting each project is measured by its potential future profit, so the management of the organization can choose the one to INVEST first.Capital budgeting requires decisions on a company's long-term investment in operations. Examples of capital budgeting are the preparation of future RETURNS on EQUIPMENT, REAL estate and technological investments.In capital budgeting, first the potential opportunities are identified and EVALUATED, next the operating and implementation costs are estimated, along with this the cash flow of the company is also estimated. Finally the risk is assessed and then the project is implemented.Capital budgeting is calculated through methods such as payback perios, the IRR, the method of accounting rate of return, NPV method and many more. |
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