Describe the capital budgeting process.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Describe the capital budgeting process.
The Capital Budgeting process is the process of planning which is used to evaluate the potential investments whose amount is significant. It helps in determining the company’s investment in the long term fixed assets such as investment in the addition or replacement of the plant & machinery, new equipment, Research & development, etc. This process the decision regarding the sources of finance and then calculating the return that can be earned from the investment done. Capital budgeting decisions are irreversible and involves high amount of risk.
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