Jomar T.

Coruno
Reporter
CAPITAL BUGDETING DEFINED
Capital Budgeting is the process of deciding
whether or not to commit, resources to projects
whose costs and benefits are spread over several
time periods. It involves:
The preparation of annual budget for capital
investment
The assessment of funding capacities and;
The allocation of resources to renewal and
expansion projects which most clearly conform with
the companys priorities.


Capital budgeting is used to describe actions
relating to the planning and financing capital outlays
for such purposes as the purchase of new
machinery, the modernization of plant facilities or
the introduction of new product lines.
-Cabrera, E.B.

Capital Budgeting deals with analyzing the
profitability and/or liquidity of a given project
proposal. It is premised on the following:
Funds are available
Business opportunities (i.e., project
proposals) abound waiting to be tapped
Business opportunities are subject to
quantitative evaluation.

-Agamata, F.

Capital Budgeting is the process of identifying,
evaluating, planning, and financing capital
investment projects of an organization. This is
different from the periodic operating planning that
we do, since capital budgeting involves capital
investment projects which require large sum of
outlay and involve a long period of time - longer
than the usual cut-off of one year or normal
operating cycle.

-Roque, Rodelio S.

Capital Budgeting is the process of determining
which real investment projects should be accepted
and given an allocation of funds from the firm


Pamela Peterson,
Florida State University

CLASSIFYING PROJECTS
Replacement
Projects
Expansion
Projects
New Products
and Services
Regulatory,
Safety, and
Environmental
Projects
Other
CHARACTERISTICS OF A CAPITAL
INVESTMENT DECISION
Substantial amount of funds are required in
capital projects.

Because of the length of time spanned by a
capital investment decision, the element of
uncertainty becomes more critical.

Because of the length of time spanned by a
capital investment decision, the element of
uncertainty becomes more critical.

The effect of managerial errors will be difficult
to reverse.

Plan must be made will into an uncertain future.

Success of failure of the company may depend
upon a single or relatively few investment
decisions.

CATEGORIES OF INVESTMENT
PROJECTS
Independent Project
the acceptance or rejection of which does not
directly eliminate other projects from
consideration or affect the likelihood of their
selection.

Mutually Exclusive Projects
the acceptance of one prevents the
acceptance of the alternative proposal.
Contingent Project
the acceptance or rejection of which is
dependent on the decision to accept or
reject one or more other projects.

THANK YOU!!!