Capital Budgeting - Revision history

User: The LinkTitles extension automatically added links to existing pages (https://github.com/bovender/LinkTitles).

2021-02-06T14:26:56Z

The LinkTitles extension automatically added links to existing pages (https://github.com/bovender/LinkTitles).

User at 19:46, 5 February 2021

2021-02-05T19:46:16Z

User: Capital budgeting is a process used by companies for evaluating and ranking potential expenditures or investments that are significant in amount.

2018-12-12T23:18:53Z

Capital budgeting is a process used by companies for evaluating and ranking potential expenditures or investments that are significant in amount.

New page

Capital budgeting is a process used by companies for evaluating and ranking potential expenditures or investments that are significant in amount. The large expenditures could include the purchase of new equipment, rebuilding existing equipment, purchasing delivery vehicles, constructing additions to buildings, etc. The large amounts spent for these types of projects are known as capital expenditures.<ref>Capital Budgeting Definition [http://www.accountingcoach.com/blog/what-is-capital-budgeting Accounting Coach]</ref>

Ideally, businesses should pursue all projects and opportunities that enhance shareholder value. However, because the amount of capital available at any given time for new projects is limited, management needs to use capital budgeting techniques to determine which projects will yield the most return over an applicable period of time. Various methods of capital budgeting can include throughput analysis, net present value (NPV), internal rate of return (IRR), discounted cash flow (DCF) and payback period.<ref>Breaking Down Capital Budgeting [http://www.investopedia.com/terms/c/capitalbudgeting.asp Investopedia]</ref>

There are three general methods for deciding which proposed projects should be ranked higher than other projects, which are (in declining order of preference):
*Throughput analysis. Determines the impact of an investment on the throughput of an entire system.
*Discounted cash flow analysis. Uses a discount rate to determine the present value of all cash flows related to a proposed project. Tends to create improvements on a localized basis, rather than for the entire system, and is subject to incorrect results if cash flow forecasts are incorrect.
*Payback analysis. Calculates how fast you can earn back your investment; is more of a measure of risk reduction than of return on investment.<ref>Overview of Capital Budgeting [http://www.accountingtools.com/overview-of-capital-budgeting Accounting Tools]</ref>

===References===
<references />

===Further Reading===
*What is Capital Budgeting [http://www.exinfm.com/training/capitalbudgeting.doc Exinfm]
*Capital Budgeting Basics [https://www.extension.iastate.edu/agdm/wholefarm/html/c5-240.html IAState.edu]
*Capital Budgeting [https://en.wikipedia.org/wiki/Capital_budgeting Wikipedia]

@@ Line 1: / Line 1: @@
-'''Capital Budgeting''' is a process used by companies for evaluating and ranking potential expenditures or investments that are significant in amount. The large expenditures could include the purchase of new equipment, rebuilding existing equipment, purchasing delivery vehicles, constructing additions to buildings, etc. The large amounts spent for these types of projects are known as capital expenditures.<ref>Capital Budgeting Definition [http://www.accountingcoach.com/blog/what-is-capital-budgeting Accounting Coach]</ref>
+'''[[Capital]] Budgeting''' is a [[process]] used by companies for evaluating and ranking potential expenditures or investments that are significant in amount. The large expenditures could include the purchase of new equipment, rebuilding existing equipment, purchasing delivery vehicles, constructing additions to buildings, etc. The large amounts spent for these types of projects are known as capital expenditures.<ref>Capital Budgeting Definition [http://www.accountingcoach.com/blog/what-is-capital-budgeting Accounting Coach]</ref>
 Ideally, businesses should pursue all projects and opportunities that enhance [[Shareholder Value|shareholder value]]. However, because the amount of capital available at any given time for new projects is limited, [[Management|management]] needs to use capital budgeting techniques to determine which projects will [[Return on Invested Capital (ROIC)|yield the most return]] over an applicable period of time. Various methods of capital budgeting can include [[Throughput Analysis|throughput analysis]], [[Net Present Value (NPV)|net present value (NPV)]], [[Internal Rate of Return|internal rate of return (IRR]]), [[Discounted Cash Flow (DCF)|discounted cash flow (DCF)]] and [[Payback Period|payback period]].<ref>Breaking Down Capital Budgeting [http://www.investopedia.com/terms/c/capitalbudgeting.asp Investopedia]</ref>
 There are three general methods for deciding which proposed projects should be ranked higher than other projects, which are (in declining order of preference):
-*Throughput analysis. Determines the impact of an investment on the throughput of an entire system.
+*Throughput analysis. Determines the [[impact]] of an investment on the throughput of an entire [[system]].
-*Discounted cash flow analysis. Uses a discount rate to determine the present value of all cash flows related to a proposed project. Tends to create improvements on a localized basis, rather than for the entire system, and is subject to incorrect results if cash flow forecasts are incorrect.
+*Discounted cash flow analysis. Uses a discount rate to determine the present [[value]] of all cash flows related to a proposed project. Tends to create improvements on a localized basis, rather than for the entire system, and is subject to incorrect results if cash flow forecasts are incorrect.
-*Payback analysis. Calculates how fast you can earn back your investment; is more of a measure of risk reduction than of return on investment.<ref>Overview of Capital Budgeting [http://www.accountingtools.com/overview-of-capital-budgeting Accounting Tools]</ref>
+*Payback analysis. Calculates how fast you can earn back your investment; is more of a measure of [[risk]] reduction than of return on investment.<ref>Overview of Capital Budgeting [http://www.accountingtools.com/overview-of-capital-budgeting Accounting Tools]</ref>

← Older revision		Revision as of 19:46, 5 February 2021
Line 1:		Line 1:
−	Capital ~~budgeting~~ is a process used by companies for evaluating and ranking potential expenditures or investments that are significant in amount. The large expenditures could include the purchase of new equipment, rebuilding existing equipment, purchasing delivery vehicles, constructing additions to buildings, etc. The large amounts spent for these types of projects are known as capital expenditures.<ref>Capital Budgeting Definition [http://www.accountingcoach.com/blog/what-is-capital-budgeting Accounting Coach~~]</ref>~~	+	'''Capital Budgeting''' is a process used by companies for evaluating and ranking potential expenditures or investments that are significant in amount. The large expenditures could include the purchase of new equipment, rebuilding existing equipment, purchasing delivery vehicles, constructing additions to buildings, etc. The large amounts spent for these types of projects are known as capital expenditures.<ref>Capital Budgeting Definition [http://www.accountingcoach.com/blog/what-is-capital-budgeting Accounting Coach]</ref>
−
−
−	Ideally, businesses should pursue all projects and opportunities that enhance shareholder value. However, because the amount of capital available at any given time for new projects is limited, management needs to use capital budgeting techniques to determine which projects will yield the most return over an applicable period of time. Various methods of capital budgeting can include throughput analysis, net present value (NPV), internal rate of return (IRR), discounted cash flow (DCF) and payback period.<ref>Breaking Down Capital Budgeting [http://www.investopedia.com/terms/c/capitalbudgeting.asp Investopedia]</ref>

		+	Ideally, businesses should pursue all projects and opportunities that enhance [[Shareholder Value\|shareholder value]]. However, because the amount of capital available at any given time for new projects is limited, [[Management\|management]] needs to use capital budgeting techniques to determine which projects will [[Return on Invested Capital (ROIC)\|yield the most return]] over an applicable period of time. Various methods of capital budgeting can include [[Throughput Analysis\|throughput analysis]], [[Net Present Value (NPV)\|net present value (NPV)]], [[Internal Rate of Return\|internal rate of return (IRR]]), [[Discounted Cash Flow (DCF)\|discounted cash flow (DCF)]] and [[Payback Period\|payback period]].<ref>Breaking Down Capital Budgeting [http://www.investopedia.com/terms/c/capitalbudgeting.asp Investopedia]</ref>

	There are three general methods for deciding which proposed projects should be ranked higher than other projects, which are (in declining order of preference):		There are three general methods for deciding which proposed projects should be ranked higher than other projects, which are (in declining order of preference):