jntuk fm 3rd unit by gangadhar u
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CAPITAL BUDGETING
The total amount ofmoney invested in a business togenerate income is known ascapital.
Capital:
The word Capitalrefers to long-term sources offunds.
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Budget:
Budget is a
statement. It is an estimation ofthe revenue and epenses over a
speci!ed future period of time.
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Budgeting:
Budgeting is aprocess.This means budgeting is numberof activities performed in order to
prepare a budget. In a business" thebudgeting for operations willinclude the following. #reparing estimates of future
sales. #reparing estimates of future
cash collections anddisbursements.
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#reparing estimates of futureday-to-day activities of theorgani$ation.
%ummari$ing the estimates intoan income statement andbalance sheet.
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Capital Budgeting:
&Capital Budgeting is
a long-term planning for making and!nancing proposed capital outlays.'
-------- Charles T.
(orngren
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Future benefits will occur to the firm over a series of years
Features of Capital Budgeting:
The exchange of current funds for future benefits.
The funds are invested in long-term assets
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Significance of Capital Budgeting:
1. Involvement of Heavy Funds
2. Longterm in!uen"e
#. Ca$ital %udgeting de"isions are irreversi%le
&. 'ost di("ult in 'a)ing
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Process of capital udgeting decisions:
Ideageneration
*valuation+ro,e"t-ele"tion
Finan"ing
Im$lementation
eview
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/I0I/*/ /*CI-I-
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+3T F +FIT4 5HICH I-/I-TIB6T*/ 3'7 TH*-H3*HL/*- I- 85 3-/I0I/*/
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)*+I,ITI,:
9/ividend is adistri%ution to shareholdersout of $rots or reservesavaila%le for this $ur$ose.;----Institute of Charted ccounts of
India.
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T/#*% +
)I0I)*,):
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