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Properly budgeting capital expenditures and investment can result in good cash flow, which translates to company expansion. Increases in factory production or service features can increase market diversity that make a company better positioned to expand both internationally and in its current market. Subjects covered include the process, characteristics such as evaluation methods (NPV, IRR, initial cash flow, initial costs, etc.), benefits to company, responsibilities and impact on decisionmaking. Bibliography lists 9 sources. jvCapBud.rtf
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amount it can borrow to invest in capital outlays. Though cash can be increased by increasing the number of stocks issued, this decreases the value of the stock and is,
therefore, also a limited funding source. (Gropelli & Ehsan, 2000, 138). Properly budgeting capital expenditures and investment can result in good cash flow,
which translates to company expansion. Increases in factory production or service features can increase market diversity that make a company better positioned to expand both internationally and in its current
market. Though capital requests can be made by various department heads in a corporation and this dynamic is changing, capital decisions are often
made by one or a handful of financial managers who decide which investments are worthy of consideration and which will be denied. Because of this limited resource for evaluation of
capital budget requests, it is necessary to have a capital budgeting process in place to guide decisions about capital expenditures and investments.
Capital Budgeting Process and Its Characteristics The capital budgeting process involves a number of steps that are cyclical as well as linear. For
example, one-time capital expenditures are amortized over a number of years, such as land and buildings. In addition, all companies have ongoing annual capital expenditures like replacing a number of
computer systems annually or, as in the hotel industry, replacing furniture, fixtures and equipment and renovating land. (Swidler, 1998, 62). Capital budgeting
does not always refer only to physical objects or processes. Governments must invest capital every year in departments such as education, welfare, the environment, and so on. Business firms have
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