which of the following is an objective of capital budgeting? course hero

What are the objectives of capital budgeting?

The following are the objectives of capital budgeting. 1. To find out the profitable capital expenditure. 2. To know whether the replacement of any existing fixed assets gives more return than earlier.

What should the analyst focus on during the capital budgeting process?

C. analysts should focus on the project's cash flows, uncontaminated by cash flows from the firm's other activities 21. All of the following are considered stages in the capital budgeting process EXCEPT:

What does the capital budgeting model consider?

This capital budgeting model concerns how long it takes to recover the initial investment from a project. This capital budgeting model considers the time value of money. C. Both A and B D.

What are the two types of capital budgeting decisions?

Broadly, there are two types of capital budgeting decisions which expand revenue or reduce cost. 1. Investment decisions affecting revenue It includes all those investment decisions which are expected to bring additional revenue by raising the size of firm’s total revenue.

What does "d" mean in a budget?

How much is ending accounts payable?

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Solved Generally, the first of the following budgets to be | Chegg.com

Business; Accounting; Accounting questions and answers; Generally, the first of the following budgets to be prepared is the Select one: A. purchases budget.

What does "d" mean in a budget?

D. emphasize the importance of meeting the budget in order to receive performance raises.

How much is ending accounts payable?

Current purchases are $264,000 calculated as ending inventory of $64,000 plus cost of goods sold of $250,000 = $314,000, less beginning inventory of $50,000 = $264,000

What are the objectives of capital budgeting?

1. To find out the profitable capital expenditure. 2. To know whether the replacement of any existing fixed assets gives more return than earlier. 3. To decide whether a specified project is to be selected or not. 4.

What is capital budgeting?

Capital Budgeting is the process of making investment decision in fixed assets or capital expenditure. Capital Budgeting is also known as investment, decision making, planning of capital acquisition, planning and analysis of capital expenditure etc. Capital Budgeting – Meaning, Objectives ,Features ,Limitations.

What is investment decision?

It includes all those investment decisions which are expected to bring additional revenue by raising the size of firm’s total revenue. It is possible either by expansion of present operations or the development of new product in line. In both the cases fixed assets are required.

What is the rationale behind capital budgeting decisions?

The rationale behind the capital budgeting decisions is efficiency. A firm has to continuously invest in new plant or machinery for expansion of its operations or replace worn out machinery for maintaining and improving efficiency . The main objective of the firm is to maximize profit either by way of increased revenue or by cost reduction. Broadly, there are two types of capital budgeting decisions which expand revenue or reduce cost.

Is control over capital expenditure exercised?

The actual economic life of the project is either increased or decreased. Likewise, the actual annual cash inflows may be either more or less than the estimation. Hence, control over capital expenditure can not be exercised. 2.

Is capital budgeting based on cash inflows?

2. The application of capital budgeting technique is based on the presumed cash inflows and cash outflows. Since the future is uncertain, the presumed cash inflows and cash outflows may not be true. Therefore, the selection of profitable project may be wrong.

What is capital budgeting?

Capital budgeting, also known as an investment appraisal, is a financial management tool you can ensure it is adding the expected value and continue to measure the progress of the project. It determines the number of years it takes for a project’s cash flow to pay back the initial cash investment, an assessment of risk, and various other factors.

What is the final stage of capital budgeting?

The final stage of capital budgeting involves the comparison of actual results with the standard ones. The management needs to measure and correlate the actual performance with that of the estimated one to figure out the deviation and take corrective actions for the same.

What are the characteristics of capital budgeting?

The features of capital budgeting are briefly explained below: 1 Huge Funds: Capital budgeting involves the investment of funds currently for getting benefits in the future. 2 High Degree of Risk: To take decisions that involve a huge financial burden can be risky for the company. 3 Affects Future Competitive Strengths: The future benefits are spread over several years. Sensible investing can improve its competitiveness, whereas a wrong investment may lead to business failure. 4 Difficult Decision: When the future is dependant on capital budgeting decisions, it becomes difficult for the management to grab the most appropriate investment opportunity. 5 Estimation of Large Profits: Each project involves a huge amount of funds with the perspective of earning desirable profits in the long term. 6 Long Term Effect: The effect of the decisions taken, will be visible in the future or the long term. 7 Affects Cost Structure: For instance, it may increase the fixed cost such as insurance charges, interest, depreciation, rent, etc. 8 Irreversible Decision: Capital expenditure decisions are irreversible since it involves a high-value asset which may not be sold at the same price once purchased.

Why is capital budgeting important?

Capital budgeting is an important financial management tool because when you need to assess and rank the value of projects or investments that require a large capital investment to determine whether they are worth pursuing. For example, investors can use capital budgeting to analyze investment options and decide which ones are worth investing in.

What is the control of capital expenditure?

Control of Capital Expenditure: Estimating the cost of investment provides a base to the management for controlling and managing the required capital expenditure accordingly.

What happens after apportioning long term investment?

After the apportioning of the long-term investment, the company comes into action for the execution of its decision. To avoid complications and excess time consumption, the management should lay out a detailed plan of the project in advance.

Is capital expenditure irreversible?

Irreversible Decision: Capital expenditure decisions are irreversible since it involves a high-value asset which may not be sold at the same price once purchased.

What does "d" mean in a budget?

D. emphasize the importance of meeting the budget in order to receive performance raises.

How much is ending accounts payable?

Current purchases are $264,000 calculated as ending inventory of $64,000 plus cost of goods sold of $250,000 = $314,000, less beginning inventory of $50,000 = $264,000