Types of capital budgeting in financial management

2020-04-02 06:14

Start studying Financial Management Chapter 7 Capital Budgeting Part 2. Learn vocabulary, terms, and more with flashcards, games, and other study tools.Types of Capital Budgeting Decisions: Since capital budgeting includes the process of generating, evaluating, selecting and following up on capital expenditure alternatives, allocation of financial resources should be made by the firm to its new investment projects in the most efficient manner. types of capital budgeting in financial management

Capital budgeting is extremely important to firms since capital investment projects make up some of their most important financial investments. These projects often involve large amounts of money and making poor capital investment decisions can have a disastrous effect on the business.

Types of capital budgeting decisions 1. Acceptreject decisions: Business firm is confronted with alternative investment proposals. 2. Mutually exclusive decisions: It includes all those projects which compete with each other in 3. Capital rationing decisions: Capital budgeting decision is a Financial Budget. A business is always in need of short term and longterm funds. The financial budget ensures that right types of funds are available whenever they are required. The aim of this budget is to manage the outflows with the inflows. The outflow is in thetypes of capital budgeting in financial management Jan 10, 2019 04 Replacement Project Necessary to Reduce Business Costs. This type of capital budgeting project would require a detailed financial analysis with cash flows estimated from each piece of equipment in order to determine which generates the most in cash flows and, thus, saves money. These are the four basic types of capital budgeting projects, although there are offshoots of each one.