Question
After you have read the article write a brief 300-400 word summary that includes examples of how it can be used in a business Capital
After you have read the article write a brief 300-400 word summary that includes examples of how it can be used in a business
Capital budgeting is the process by which you evaluate the financial potential for each of one or more possible capital investments. In those cases where several options are available but the corporation has enough resources to pursue only one, each option must be compared against the others in order to determine which one will yield the greatest returns. Just about everything corporations spend money on can be considered an investment. Because corporations manage other peoples money, nothing they spend that money on is supposed to be for personal gain or enjoyment; rather, its supposed to be used to generate returns for the owners of the corporation, who are the stockholders. So, every dollar a corporation spends should contribute to the increased value of the corporation in some way. But thats not always the case, because many corporations are very wasteful. Plus, you dont really need to measure the returns on every single dollar. For example, nobody cares how much value a paper clip adds to the total output of a corporation. When it comes to larger expenditures, though, you start to run into matters of potential returns and capital budgeting. When a corporation is considering buying land, a new plant, or new machinery; offering a new line or product; or starting a new project; all these undertakings need to be carefully analyzed from a financial standpoint to determine their potential returns and risk before any action is taken.
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