ECONOMICS

Detailed explanation-1: -The process of planning and managing a firm’s long-term investments is called capital budgeting. In capital budgeting, the financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire.

Detailed explanation-2: -The financial manager must decide how much money is needed and when, how best to use the available funds, and how to get the required financing. The financial manager’s responsibilities include financial planning, investing (spending money), and financing (raising money).

Detailed explanation-3: -A capital budget is a long-term plan that outlines the financial demands of an investment, development, or major purchase. As opposed to an operational budget that tracks revenue and expenses, a capital budget must be prepared to analyze whether or not the long-term endeavor will be profitable.

Detailed explanation-4: -Capital budgeting decision may be defined as the firm’s decision to invest its funds in the long term assets in anticipation of an expected flow of benefits over a number of years. It involves a current outlay or series of outlays of cash resources in return for an anticipated flow of future benefits.