Nature Of Capital Budgeting Homework Help

Nature Of Capital Budgeting 

capital budging decisions pertain to fixed long-term assets which by definition refer to assets which are in operation, and yield a return, over a period of time usually exceeding one year. They, therefore, involve a current outlay or series of outlays of cash resources in return for an. anticipated flow of future benefits. I In other words, the system of capital budgeting is employed to evaluate expenditure decisions which involve current outlays but are likely to produce benefits over a period of time longer than one year. These benefits may be either in the form of increased revenues or reduced costs. capital expenditure management, therefore, includes addition disposition modification and replacement of fixed assets. From the preceding discussion may be deduced the following basic features of capital budgeting (i) potentially large anticipated benefits OJ) a relatively high degree of risk and (Hi) a relatively long time period between the initial outlay and the anticipated returns. The term capital budgeting is used interchangeably with capital expenditure decision capital expenditure management long-term investment decision management of fixed assets and so on

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