Capital budgeting decisions are big decisions for companies. Many times, they will have limited funds and several project options to consider. By looking at each option using several different methods, managers can get the information they need to spend limited dollars in the way that will bring the greatest rate of return.
We will discuss multiple methods that can be used to analyze various potential projects in a side-by-side way. Beginning with the screening process, which helps to determine if a project should move onto the next step,by meeting predetermined criteria of each individual business, through the post-audit, which evaluates whether the project we ultimately chose to fund, lived up to the expectations.
So these big decisions cannot be taken lightly. Whether you are buying a new piece of equipment, building a new production facility or doing a complete redesign of a website, it is important to analyze not only the cost of the project, but the future benefits of the project as well.
Are you ready?
- Why It Matters: Capital Budgeting Decisions. Authored by: Freedom Learning Group. Provided by: Lumen Learning. License: CC BY: Attribution