Capital expenditure involves long-term outlays of funds with the expectation of benefits extending far into the future. It is a primary goal of capital budgeting to increase firm value for shareholders. Capital budgeting determines whether long-term investments like new machinery or plants should be undertaken. Risk analysis in capital budgeting considers both the standalone risk of projects and risks in the context of the firm or market. The capital budgeting process includes identifying investment opportunities, assembling proposals, implementing approved projects, and reviewing performance.
Capital budgeting is a process of evaluating investments and huge expenses in order to obtain the best returns on investment.
An organization is often faced with the challenges of selecting between two projects/investments or the buy vs replace decision. Ideally, an organization would like to invest in all profitable projects but due to the limitation on the availability of capital an organization has to choose between different projects/investments.
What are the objectives of Capital budgeting?
Capital expenditures are huge and have a long-term effect. Therefore, while performing a capital budgeting analysis an organization must keep the following objectives in mind:
1. Selecting profitable projects
An organization comes across various profitable projects frequently. But due to capital restrictions, an organization needs to select the right mix of profitable projects that will increase its shareholders’ wealth.
2. Capital expenditure control
Selecting the most profitable investment is the main objective of capital budgeting. However, controlling capital costs is also an important objective. Forecasting capital expenditure requirements and budgeting for it, and ensuring no investment opportunities are lost is the crux of budgeting.
3. Finding the right sources for funds
Determining the quantum of funds and the sources for procuring them is another important objective of capital budgeting. Finding the balance between the cost of borrowing and returns on investment is an important goal of Capital Budgeting.
The following are the two methods:
A) Traditional Method
1. Pay back period method
2. Improvement of traditional approach
3. Rate of Return Method or Accounting Method
B) Time adjusted method or discount methods
4. Net Present Value method
5. Internal Rate of Return Method
6. Profitability Index Method
Capital budgeting is a process of evaluating investments and huge expenses in order to obtain the best returns on investment.
An organization is often faced with the challenges of selecting between two projects/investments or the buy vs replace decision. Ideally, an organization would like to invest in all profitable projects but due to the limitation on the availability of capital an organization has to choose between different projects/investments.
What are the objectives of Capital budgeting?
Capital expenditures are huge and have a long-term effect. Therefore, while performing a capital budgeting analysis an organization must keep the following objectives in mind:
1. Selecting profitable projects
An organization comes across various profitable projects frequently. But due to capital restrictions, an organization needs to select the right mix of profitable projects that will increase its shareholders’ wealth.
2. Capital expenditure control
Selecting the most profitable investment is the main objective of capital budgeting. However, controlling capital costs is also an important objective. Forecasting capital expenditure requirements and budgeting for it, and ensuring no investment opportunities are lost is the crux of budgeting.
3. Finding the right sources for funds
Determining the quantum of funds and the sources for procuring them is another important objective of capital budgeting. Finding the balance between the cost of borrowing and returns on investment is an important goal of Capital Budgeting.
The following are the two methods:
A) Traditional Method
1. Pay back period method
2. Improvement of traditional approach
3. Rate of Return Method or Accounting Method
B) Time adjusted method or discount methods
4. Net Present Value method
5. Internal Rate of Return Method
6. Profitability Index Method
Capital budgeting is the process of determining the viability to lon.pdfKARTIKINDIA
Capital budgeting is the process of determining the viability to long-term investments on
purchase or replacement of property plant and equipment and other capital investments in
business. However there are some practical problem on which decision are to be taken by the
management.
1.) Involves Huge investment: As the investment in capital projects involves huge outflow of
company resources there is greater need for proper planning through capital expenditure.This
will affect the company cash flows as huge outflow of cash occurs.
2.) Irreversable: Capital investment decision once taken are very difficult to reverse. It is
imporatant because most capital assets are business shall be customised according to the needs of
business, hence disposal of those assets without proper usilisation shall incur losses to the
organisation.
3.) Capital investments involves Risk: Before investing in capital assest it is paramount to
properly plan the acquisition of the asset or development as they are used for longterm and they
posses greater financial risks., like obsolescence of technology, etc
4.) Funding for the project:Since capital investments involves larger outflow of organisational
resources it is important for the finance department to identify the source of fund. Also they
require the altered business plan and cash flows to show profitabity in the future.
5.) Return on investment and Payback period: It is also important to estimate and analyse the
benefits of the investment and determin the estimated payback period. Hence, Proper capital
budgeting planning is must.
Solution
Capital budgeting is the process of determining the viability to long-term investments on
purchase or replacement of property plant and equipment and other capital investments in
business. However there are some practical problem on which decision are to be taken by the
management.
1.) Involves Huge investment: As the investment in capital projects involves huge outflow of
company resources there is greater need for proper planning through capital expenditure.This
will affect the company cash flows as huge outflow of cash occurs.
2.) Irreversable: Capital investment decision once taken are very difficult to reverse. It is
imporatant because most capital assets are business shall be customised according to the needs of
business, hence disposal of those assets without proper usilisation shall incur losses to the
organisation.
3.) Capital investments involves Risk: Before investing in capital assest it is paramount to
properly plan the acquisition of the asset or development as they are used for longterm and they
posses greater financial risks., like obsolescence of technology, etc
4.) Funding for the project:Since capital investments involves larger outflow of organisational
resources it is important for the finance department to identify the source of fund. Also they
require the altered business plan and cash flows to show profitabity in the future.
5.) Return on investment and Pa.
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
Embracing GenAI - A Strategic ImperativePeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
Biological screening of herbal drugs: Introduction and Need for
Phyto-Pharmacological Screening, New Strategies for evaluating
Natural Products, In vitro evaluation techniques for Antioxidants, Antimicrobial and Anticancer drugs. In vivo evaluation techniques
for Anti-inflammatory, Antiulcer, Anticancer, Wound healing, Antidiabetic, Hepatoprotective, Cardio protective, Diuretics and
Antifertility, Toxicity studies as per OECD guidelines
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
2. Capital expenditure
It involves a current / future outlay of funds in the expectation of a stream of benefits
extending far into future.
Features:
1. They involve long term consequences
2. They involve substantial outlays.
3. Difficult to reverse as they are expensive.
3. Why is it required?
Capital structure decision
Short term operations – working capital decision
Allocation of capital.
One of the primary goals of capital budgeting investments is to increase the value of
the firm to the shareholders.
Financial decisions are left with the top level management. Finance manager is
entitled with this responsibility.
4. The planning process used to determine whether an organization's long term
investments.
Examples: new machinery, replacement of machinery, new plants, new products,
and research development projects
Risk analysis in capital budgeting fall into two broad categories:
1. Approaches that consider the stand alone risk of a project
2. Approaches the risk of a project in the context of the firm /market.
6. Making an investment proposal into a concrete project is a complex, time-
consuming, and risk-fraught task.
Adequate Formulation of projects
Use of the principle of Responsibility Accounting
Use of Network Techniques. (PERT and CPM)
7. Statistical techniques of Risk analysis
Probability
Standard Deviation/Variance
Co-efficient of Variation.
Conventional techniques of Risk analysis
Payback period
Risk adjusted discount rate
Certainity equivalent
