Capital Budgeting
Business
Another Business Courses
Capital budgeting is the process that a business uses to determine which proposed fixed asset purchases it should accept, and which should be declined. This process is used to create a quantitative view of each proposed fixed asset investment, thereby giving a rational basis for making a judgment. Capital budgeting is important because it creates accountability and measurability. ... The capital budgeting process is a measurable way for businesses to determine the long-term economic and financial profitability of any investment project. A capital budgeting decision is both a financial commitment and an investment. Capital budgeting makes decisions about the long-term investment of a company's capital into operations. Planning the eventual returns on investments in machinery, real estate and new technology are all examples of capital budgeting.