MANAGEMENT

Detailed explanation-1: -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.

Detailed explanation-2: -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. This process is also known as investment appraisal.

Detailed explanation-3: -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-4: -Capital budgeting is used by companies to evaluate major projects and investments, such as new plants or equipment. The process involves analyzing a project’s cash inflows and outflows to determine whether the expected return meets a set benchmark.

Detailed explanation-5: -Capital budgeting relates to planning for the best selection and financing of long-term investment proposals. Capital budgeting decisions are not equally essential to all companies. The relative importance of this function varies with company size, the nature of the industry, and the growth rate of the firm.