Capital Budgeting

CAPITAL BUDGETING The total smashing ( spacious-term and short term ) of a company is employed in fixed and current assets of the firm. Fixed assets accommodate those assets which are not meant for sale such as land, building, machinery etcetera it is a challenging task before the management to take in judicious regarding with child(p) expenditures, i.e., investments in fixed assets to that the amount should not unnecessarily be locked up in crown goods which may have fa-reaching effectuate on the success or failure of an enterprise. A capital asset, at one time acquired, cannot be disposed of without any substantial loss and if it is acquired on long term credit basis, a continuing liability is incurred oer a long period of time, and will affect the monetary obligations of the company adversely. It, therefore, requires a long-range planning while taking decision regarding investments in fixed assets. Such process of taking decisions regarding capital expenditure is generally known as capital budgeting. In capital budgeting process, due consideration should b given to the following problems- (1) trouble of ranking project, i.e., choice of one project over separate project. (2) Problem of capital rationing, i.e., limited budget resources.

(3) Limitations imposed by top management decision on the total sight of investments to be made. Now-a-days, however, some new analytical techniques are developed for evaluating capital expenditure projects an are under reckon. Demerits or Limitations of Discounted Cash fall down Method (1) It involves a good amount of calculations hence it is strong and complicated. But the supporters of this rule rebute the argument and assert that difficulty of the method is unfamiliarity rather than its complexity. (2) It does not correspond to accounting concepts for save costs and revenues with the consequence that special analysis is necessary for the study of capital investment. (3) The selection of cash inflows is based o sales... If you wishing to get a full essay, order it on our website: Orderessay

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