The Importance of Capital Budgeting & Post Audits

TRUE or FALSE for Questions 1 4

1. An incentive program that encourages new ideas, whether for new products or better processes, is a good way to generate capital investment proposals.

A. True

B. False

2. Capital expenditures are long term & expensive.

A. True

B. False

3. Ideas for capital investment should come from the engineering & sales departments rather than from the finance department.

A. True

B. False

4. A post audit is an important step in the capital budgeting process.

A. True

B. False

5. Capital projects are either mutually exclusive or independent. Which of the following phrases correctly describe mutually exclusive projects? Choose all that apply.

A. Projects that, whether accepted or rejected, do not affect the cash flows of other projects

B. Those projects that, if accepted, preclude the acceptance of all other competing projects

C. Those projects that, if rejected, preclude the acceptance of all other competing projects

D. By definition, they are not also independent projects

E. Project choices that rule out competing project choices