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Capital budgeting

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short & simple prsntation :)

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Capital budgeting

  1. 1. Capital Budgeting
  2. 2. Introduction• Investment/ project selection.• Investment Finance• funds allocation
  3. 3. Investment/project selection• Make or buy decision.• Outsourcing• expansion of capacity.• Product improvement/adaptation.• Inventory management.• Compliances with government regulations
  4. 4. Investment Finance• Under this decision is taken about financing achosen investment project. The firm isbasically concerned in dealing with risks anduncertainties.• The firm has two sources of finance:InternalExternal
  5. 5. Funds allocation• It is about taking decisions regardingallocation of files into different investmentprojects in the strategic setup
  6. 6. Project planning
  7. 7. Meaning• Project planning is a process of conceiving,generating evaluating and selecting the mostprofitable investment proposal project.• It involves a plan for the investment of funds
  8. 8. Significance• Capital expenditure nature have long-termeffects.• Capital expenditure decisions are irreversible• Huge amount of money is not involved in aproject.• Helps in avoiding losses• Helps in achieving control• ensures optimal utilisation of resources
  9. 9. Difficulty of project planning• Problem in measuring costs and benefits• tangible benefits cannot be determined• inflationary conditions• lack of information• budgetary limits
  10. 10. Stages of project planning• Search new investment proposals• project classification• analysis of costs and benefits• the measurement of investment worth• feasibility study• decision-making• implementation• performance review