ECONOMICS

Detailed explanation-1: -Capital budgeting is a decision-making process of selecting both short-term and long term investments. Q. The initial investment is the immediate cash outflow necessary to purchase the asset and put it into operating order.

Detailed explanation-2: -The investment of funds into capital or productive assets, which is what capital budgeting entails, meets all three of the above criteria and therefore is considered a long-term decision.

Detailed explanation-3: -Capital budgeting decisions involve huge funds and are long term decisions. As they involve huge costs one wrong decision would have a big effect on the business. Hence, capital budgeting decisions are irreversible as its difficult to take back the decision.

Detailed explanation-4: -Capital budgeting involves identifying the cash in ows and cash out ows rather than accounting revenues and expenses owing from the investment. For example, non-expense items like debt principal payments are included in capital budgeting because they are cash ow transactions.

Detailed explanation-5: -Capital Budgeting is the process of making financial decisions regarding investing in long-term assets for a business. It involves conducting a thorough evaluation of risks and returns before approving or rejecting a prospective investment decision.