Hi,

For this video, https://www.youtube.com/watch?v=TrKVj_wLgUc I had to imagine the producers of this video asked me to appear in the video to offer two additional considerations in capital budgeting decisions. One consideration must be quantitative (numeric). The other must be qualitative (non-numeric). Here is my script to describe capital budgeting considerations that I think are important for managers to consider:

I am going to talk to you about things a financial manager should consider when making capital budgeting decisions. In order to reach the best possible capital budget decision there are several things that need to be considered, both qualitative and quantitative.One important quantitative consideration is capital rationing.Capital rationing happens when companies may not have enough founds available to invest in all the promising projects (Hickman, Byrd, & McPherson, 2013, Capital Rationing, para. 1) Capital rationing is a very common problem that needs to be identified prior to initiating more than one project because it would be wasteful of the manager to start more than one project and then not have the funds to finish either.When a manager finds himself in a capital rationing situation he would need to choose the project that would generate the highest possible net profit value.

Another aspect to take into consideration is qualitative meaning that it does not have a numeric value to it.It is important to consider the qualitative factors because they can be the feeling or the strategy behind the decision and someone could choose one decision over the other based on how they react to it.When a financial manager is deciding what project to invest it they must also consider the impact it will have on the companys branding image.If the project could shed a bad light on the company, even if it can make them a great profit, it would not be worth the risk of losing future trust or backing of the company by the customers, employers, or investors.Even if a project could potential produce a large profit, the companys branding image is more important in the long run to keep the business open and thriving for years to come and not be finished because of a single project.

Do you agree or disagree with my view of capital budgeting considerations. Is there further support you can offer on my consideration?

re

hillardis2