Defination and characteristics of capital budgeting

1. CAPITAL BUDGETING
Mirza Mohammed Karrar

2. Definition
 According to Lyrich “capital budgeting
consists of planning & development of
available capital for the purpose of
maximizing the long-term profitability of the
business”

3. Characteristics of Capital
Budgeting
 Huge Investment
 Long Term
 Irreversible
 Long Term Effect

4. Capital Budgeting Process
 Identification of various proposals
 Screening or matching proposals
 Evaluation & selection
 Final approval
 Implementation
 Review or feedback

5. Methods of Capital Budgeting
 Traditional
Methods
◦ Pay back period
◦ Accounting rate of
return(ARR)
 Modern Methods
◦ Net Present
Value(NPV)
◦ Profitability Index(PI)
◦ Internal Rate of
Return(IRR)

6. THANK YOU