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Capital Budgeting: Introduction to the Complete Process , Sep 2019

By : Abram Scharf Posted September 30, 2019 Reading Time: 2 minutes
No. of views: 16

Finding investment opportunity with maximum potential is the dream of every business owner. Generally, the entrepreneur thinks that purchasing a piece of property is the best investment option for their hard-earned money. Well, this is not the only option. The capital budgeting process can be put to use here. By performing the capital budgeting, the organizations make informed decisions about long-term investment projects. An organization always sees things from profit or lost point of view. Hence, they implement the capital budgeting to determine the fundamental merits of the investment. The decision of either investing or not in a specific project depends upon the growth initiatives of an organization that includes the return of investment from the project.

In the following section of the article, we are going to discuss the complete process of capital budgeting. However, if you want to acquire in-depth information about any topic related to it then you can take capital budgeting assignment help from the expert writers of BookMyEssay.

Understanding the Capital Budgeting Process

  • Identification of the project: The capital budgeting process begins with the generation of the proposal for investment. It is an undeniable fact that investment is necessary for businesses. The proposal could be about anything like the addition of new product line, expansion proposal for the existing one, increase in the production, and adoption of methods to reduce the cost, etc.
  • Project Evaluation: This is the part that involves judging, screening, and evaluation of the projects.  For choosing the right project it is important to estimate the benefits and the cost that would be involved in the successful completion of the project. Along with with that the evaluation of the uncertainties and risk is also done.
  • Project selection: This is the stage where decisions are made. The executives are entitled to choose the right investment opportunity. The decisions should be made on the basis of available monetary power in the organization. It involves the final approval of the investment plan and then begins the task of capital expenditure budget. This budget is the laydown amount of estimated incurred expenses on fixed assets during the duration of the budget. To know more about it you can take assignment help online.
  • Implementation: Once the selection process is done then begins the implementation. For the successful implementation of the project, assigning the responsibilities to the different employee is the best thing to do. The project management techniques such as PERT and CPM should be utilized for monitoring and controlling the entire progress of the project.
  • Performance Review: This is the final stage of the capital budgeting process. In this part, the comparison of the delivered results is done with the predicted results. The future selection of the projects is done on the basis of the results.