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#analyst-notes #cfa-level-1 #corporate-finance #introduction #reading-35-capital-budgeting
The typical steps in the capital budgeting process:

  • Generating good investment ideas to consider.
  • Analyzing individual proposals (forecasting cash flows, evaluating profitability, etc.).
  • Planning the capital budget. How does the project fit within the company's overall strategies? What's the timeline and priority?
  • Monitoring and post-auditing. The post-audit is a follow-up of capital budgeting decisions. It is a key element of capital budgeting.

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Subject 1. Capital Budgeting: Introduction
include in the capital budget. "Capital" refers to long-term assets. The "budget" is a plan which details projected cash inflows and outflows during a future period. <span>The typical steps in the capital budgeting process: Generating good investment ideas to consider. Analyzing individual proposals (forecasting cash flows, evaluating profitability, etc.). Planning the capital budget. How does the project fit within the company's overall strategies? What's the timeline and priority? Monitoring and post-auditing. The post-audit is a follow-up of capital budgeting decisions. It is a key element of capital budgeting. By comparing actual results with predicted results and then determining why differences occurred, decision-makers can: Improve forecasts (based on which good capital budgeting decisions can be made). Otherwise, you will have the GIGO (garbage in, garbage out) problem. Improve operations, thus making capital decisions well-implemented. Project classifications: Replacement projects. There are two types of replacement d


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