Financial Management - Capital Budgeting – A Conceptual Framework
Meaning and Definition - Capital Budgeting
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Capital budgeting decisions are of paramount importance in financial decisions, because efficient allocation of capital resources is one of the most crucial decisions of financial management.
Capital Budgeting – Meaning
Capital Budgeting – Definition
“Capital budgeting” has been formally defined as follows.
1. “Capital budgeting is long-term planning for making and financing proposed capital outlay”.
-Charles T. Horngreen
2. “The capital budgeting generally refers to acquiring inputs with long-term returns”.
-Richards & Greenlaw
3. “Capital budgeting involves the planning of expenditure for assets, the returns from which will be realized in future time periods”.
-Milton H. Spencer
The long-term activities are those activities that influence firms operation beyond the one year period. The basic features of capital budgeting decisions are:
1. There is an investment in long term activities
2. Current funds are exchanged for future benefits
3. The future benefits will be available to the firm over series of years.
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