Capital Budgeting

Knowledge Center





Description of Capital Budgeting. Explanation.

 

Definition Capital Budgeting. Description.

Capital Budgeting (CB) is the internal process of identifying, evaluating, and implementing a firm's investment opportunities. In other words it is the process of preparing a plan for the raising of capital funds and for their deployment.

It can also be described as the process of determining which potential long-term projects are worth undertaking. Examples of typical CB projects are the purchase of new equipment or the introduction of a new product.


Goals of Capital Budgeting

CB aims at analyzing and agreeing on those investments that will enhance a firms competitive advantage and increase shareholder wealth.

Poor capital budgeting decisions will however decrease shareholder value and may ultimately result in a company's bankruptcy.


Multiple Investments and Inflows

The typical capital budgeting decision involves a large, initial and up-front investment, followed by several smaller additional investments and a series of smaller cash inflows (returns).


Capital Budgeting Sources

For an incorporated business, funds may be obtained from a wide variety of sources. The most important ones amongst these are:

  • Issuing ordinary shares
  • Issuing preference shares
  • Issuing loans

Capital Budgeting Methods

To determine what are the right investments for an organization, several capital budgeting techniques are being used. The main ones are:


Special Interest Group - Capital Budgeting


Special Interest Group (108 members)


Forum - Capital Budgeting  

Here you will find interesting and educational discussions.


  Capital Budgeting Definition (3 reactions)
Source of long term funding of capital expenditures....
 
 
 
 
  Capital Budgeting in International Joint Ventures
How is financing done in capital budgeting when project is u...
 
 
 
 
  Lifecycle Costing on Capital Equipment
Hi, I'm looking for information on life cycle costing on cap...
 
 
 
 
  Capital Budgeting Issues (2 reactions)
What are problems and weaknesses of capital budgeting system...
 
 
 
 
  Capital Budgeting Approaches for Acquisition / Divesture of Asset with Strategic Dependence
Hello from Australia! I'm keen to hear from people who have ...
 
 
 
 

Best Practices - Capital Budgeting

Here you will find the most valuable ideas.



Expert Tips - Capital Budgeting

Here you will find high-quality advice from experts.



Resources - Capital Budgeting

Here you will find powerpoint presentations, micro-learning videos and further information sources.


Capital Budgeting and Risk Management Techniques

Capital Budgeting, Risk Management...
 

Analyzing Financial Feasibility

Financial Feasibility Analysis, Project Selection, ROI, NPV, IRR...
 
 

News about Capital Budgeting


     
 

Videos about Capital Budgeting


     
 

Presentations about Capital Budgeting


     
 

Books about Capital Budgeting


     
 

More about Capital Budgeting


     

Compare also: Portfolio Analysis

Special Interest Group Leader

You here? Sign up for free


 
 

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing  |  Strategy


More on Management  |  Return to Management Dictionary  | 

 

This ends our Capital Budgeting summary and forum.



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2019 12manage - The Executive Fast Track. V15.1 - Last updated: 17-8-2019. All names of their owners.