Sign up now
to enroll in courses, follow best educators, interact with the community and track your progress.
Purpose of Capital Budgeting & Capital Budgeting Process (in Hindi)
818 plays


Heena Malhotra
Believe in Conceptual Learning.

Unacademy user
Banglar ses sadhin nowab-Sirajuddoula
  1. Investment Decisions By Heena Malhotra

  2. PURPOSE OF CAPITAL BUDGETING The capital budgeting decisions are important, crucial and critical business decisions due to following reasons: () Substantial expenditure: Investment decisions are related with fulfilment of long term objectives and existence of an organization. To invest in a project or projects, a substantial capital investment is required. Based on size of capital and timing of cash flows, sources of finance are selected. Due to huge capital investments and associated costs, it is therefore necessary for an entity to make such decisions after a thorough study and planning. (i) Long time period : The capital budgeting decision has its effect over a long period of time. These decisions not only affect the future benefits and costs of the firm but also influence the rate and direction of growth of the firmRy Heena Malhotra

  3. (i) Irreversibility:Most ofthe investment decisions are irreversible.Oncethe decision implemented it is very difficult and reasonably and economically not possible to reverse the decision. The reason may be upfront payment of amount, contractua obligations, technological impossibilities etc. (v) Complex decision : The capital investment decision involves an assessment of future events, which in fact is difficult to predict. Further it is quite difficult to estimate in quantitative terms allthe benefits or the costs relating to a particular investment decision. By Heena Malhotra

  4. CAPITAL BUDGETING PROCESS Planning Fixing Priorities Screening Evaluation Implementatio Performance Review Selection By Heena Malhotra

  5. O The extent to which the capital budgeting process needs to be formalised and systematic procedures established depends on the size of the organisation; number of projects to be considered; direct financial benefit of each project considered by itself; the composition of the firm's existing assets and management's desire to change that composition; timing of expenditures associated with the projects that are finally accepted By Heena Malhotra

  6. Replacement and Modernisation decisions On the basis of firm's existence Expansion decisions Diversification decisions Mutually exclusive decisions On the basis of decision situation Accept-Reject decisions Contingent decisions