The budgeting process in which a company plans its capital expenditure (the spending on assets of long-term value).
Capital budgeting in corporate finance is the planning process used to determine whether an organization's long term capital investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structures (debt, equity or retained earnings). It is the process of allocating resources for major capital, or investment, expenditures. An underlying goal, consistent with the overall approach in corporate finance, is to increase the value of the firm to the shareholders. Capital budgeting is typically considered a non-core business activity as it is not part of the revenue model or models of most types of firms, or even a part of daily operations. It holds a strategic financial function within a business. One example of a firm type where capital budgeting is plausibly a part of the core business activities is with investment banks, as their revenue model or models rely on financial strategy to a considerable degree.For the budget allocated to ongoing expenses and revenue, see operating budget.
Capital budgeting is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing. It is budget for major capital, or investment, expenditures. Many formal methods are used in capital budgeting, including the techniques such as ⁕Accounting rate of return ⁕Payback period ⁕Net present value ⁕Profitability index ⁕Internal rate of return ⁕Modified internal rate of return ⁕Equivalent annuity ⁕Real options valuation These methods use the incremental cash flows from each potential investment, or project. Techniques based on accounting earnings and accounting rules are sometimes used - though economists consider this to be improper - such as the accounting rate of return, and "return on investment." Simplified and hybrid methods are used as well, such as payback period and discounted payback period.
The numerical value of capital budgeting in Chaldean Numerology is: 9
The numerical value of capital budgeting in Pythagorean Numerology is: 7