capital budgeting


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Capital budgeting

The process of choosing the firm's long-term assets.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Capital Budget

A plan for a company's capital expenditures. Capital expenditures are payments made over a period of more than one year. They are used to acquire assets or improve the useful life of existing assets; an example of a capital expenditure is the funding to construct a factory. Making a capital budget must account for the potential profitability of the plans involved. Calculating the net present value or the internal rate of return are two methods for determining a capital budget.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

capital budgeting

Corporate evaluation of long-term investment proposals, generally by means of discounting estimated future cash flows.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

capital budgeting

the process of planning and controlling CAPITAL expenditure within a firm. Capital budgeting involves the search for suitable investment opportunities; evaluating particular investment projects; raising LONG-TERM CAPITAL to finance investments; assessing the COST OF CAPITAL; applying suitable expenditure controls to ensure that investment outlays conform with the expenditures authorized; and ensuring that adequate cash is available when required for investments. See INVESTMENT APPRAISAL, BUDGETING.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

capital budgeting

the planning and control of CAPITAL expenditure within a firm. Capital budgeting involves the search for suitable INVESTMENT opportunities; evaluating particular investment projects; raising LONG-TERM CAPITAL to finance investments; assessing the COST OF CAPITAL; applying suitable expenditure controls to ensure that investment outlays conform with the expenditures authorized; and ensuring that adequate cash is available when required for investments. See INVESTMENT APPRAISAL, DISCOUNTED CASH FLOW, PAYBACK PERIOD, MARGINAL EFFICIENCY OF CAPITAL/INVESTMENT.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Detailed NPV and IRR analysis requires a considerable investment in time and human resources, and most firms have adopted shortcuts to improve the efficiency of the capital budgeting process.
Hence, the first step in capital budgeting is understanding of the cost of capital; moreover, the next step is the application of methods and techniques that we can choose the best and most economical investments.
Companies' biggest challenges within the capital budgeting process stem from difficulties around optimally distributing resources among different projects within the company.
The process of capital budgeting involves the use of various computer programs which aid the management in the analysis and facilitate the making of precise and quality conclusions.
This article provides an overview of the capital budgeting process.
Dufresne agrees: "Seeing capital budgeting as, 'I've got a budget of X million dollars for next year; what am I going to spend my money on?' and focusing on that--without looking at the big picture and how needs are going to change over time--is a big mistake.
Physician leaders increasingly are being called upon to validate the assumptions underlying financial models used in capital budgeting decisions.
Shapiro: Capital Budgeting and Investment Analysis, Upper Saddle River, NJ: Prentice Hall 2005.
The first section of the paper describes some of the weaknesses of District practice with respect to facilities planning and capital budgeting in the past--weaknesses which highlight the case for strengthening the planning and capital budget processes.