What is capital budgeting?

[Mataracy]

Capital budgeting is the planning and control of capital expenditures and is concerned with how a company, individuals, firms and government will decide on whether to,when to and how to spend money on long- tern project. In other word it may be described as management decision on long-term asset or the investment decision exceeding one accounting year. Capital budgeting decision will involve the following areas.

(1) identification of the various investment option or investment portfolio.

(2) which capital project Jr investment should we adopt?

(3) identification of the relevant cash flow s associated with each of the investment portfolios

(4) what combination of various capital projects should we under take and how should finance be raised for them?.

(5) what size of capital expenditure should we incur and for what period if time.
.(6) Project monitoring and post-project audit.

Capital investments are integral part of a company's long planning and capital budgeting which involves current cash outlay in the anticipation of future stream if benefits where a significant period of time is expected to elapse between the outlay of cash and the receipt of the benefits.
Capital investment decision can take place in business firms,public sector, and at individual levels .Business firms decisions will embrace investments in new product , in plant and machinery,advertisement ,landed properties etc. In the public sector capital investment decision may be on exploration for iron- ore ,training of workers in new technology. Constricted of new roads,schools and airports etc. While individual capital projects will include purchase or house,consumer durable goods etc

 

[sincerem]

When we budget the capital well, we'll know when it is necessary to purchase products, spend for our business and not spending out of budget. Capital budgeting will enable us achieving those aim, cos we have provisions to budget for it and not just spending lavishly that will cost of going broke in the future when we take such path.

 

[Augusta]

Everything that has to do with successful transactions needs a good budgeting or else it will fail. So it is always the right thing to do by creating a budget for all capital demanding acquisition. As you rightly stated it is always good to have an investment plan on ground to invest wisely

 

[Mataracy]

When we budget the capital well, we'll know when it is necessary to purchase products, spend for our business and not spending out of budget. Capital budgeting will enable us achieving those aim, cos we have provisions to budget for it and not just spending lavishly that will cost of going broke in the future when we take such path.

You are very correct bro. But want of those country that like borrowing all the time despite that they have planned for supplementary budget along should in case any emergency occur and yet still all the way to borrowed yet the one the planned for before is not utilized well.
Can we say that they don't have good managerial skillful people in their system despite of many Professors?

 

[Sherman198]

Before we can be successful at establishing a business, we have to make sure we calculate our budget very well.
So capital budget can be the amount of cash or resources we planned to use in carrying out some certain projects or innovations. We do budget mainly to be accurate in the amount of resources we need in doing some things.

 

[Deleted member 28127]

Before we can be successful at establishing a business, we have to make sure we calculate our budget very well.
So capital budget can be the amount of cash or resources we planned to use in carrying out some certain projects or innovations. We do budget mainly to be accurate in the amount of resources we need in doing some things.

Any unwanted increase of price in projects because in each domain there is increase of cost of projects suddenly like for example increase in price of material or software we are purchasing to run the business can occur suddenly so the calculation must take care that price can for example increase 5 % in time of purchase or 8 % so for example instead of reserving this money for business you can reserve little more for budget for such purchases.

 

[Josemendez]

Capital budgeting is something that is not quite an easy decision especially when it is coming from a firm. There are many factors that are considered before the budget is signed. These are very important because it can have adverse effect on the progress of the company if not planned very well.
Most times companies hires expert in the field in order not to make mistakes.

 

[sincerem]

You are very correct bro. But want of those country that like borrowing all the time despite that they have planned for supplementary budget along should in case any emergency occur and yet still all the way to borrowed yet the one the planned for before is not utilized well.
Can we say that they don't have good managerial skillful people in their system despite of many Professors?

Those countries who are borrowing are borrowing money for the country insight of using it for project like infrastructure and so on. But at the end the money isn't utilized well in the country cos the political leaders diverted the money into their own pockets to service their own needs. Your country's government is evident of that, no denial.

 

[Lens1000]

Capital budget is a very important thing to take not of in business and it should be put In place if your want to run a successful business and also control your spendings on projects and so on. It doesn't allow you lose track of your spendings . All you need to spend money is already in the plan and it will be very difficult to go beyond the planned expenditures