Investment and financing decisions are among the largest decisions of any business as they undertake the long term investment choice. Company's goal is to create value, that is to say, to increase its own value and therefore that of shareholder wealth. To create value, it must identify, on the resources available, a rate of return at least equal to that required of its funders.
Each organization has been found working on various projects in order to diversify the risks. Work with one client or one project poses a high risk to the organization because the functioning of the entire organization depends on this project alone. Thus, the choice of projects is essential for the organization. Again, choosing the right projects to the budget of the capital of the organization is essential.
This wise investment of the capital of the organization is known as capital budgeting. In other words, the analysis of the decision of the investment firm is known as capital budgeting.
The Capital Budget is the core of the budget summary which is the “Formulating a plan for a future period, given in monetary terms”. Generally, budgets are statements of anticipated results in financial terms. In the treatment of budget documents, we can speak of two basic levels, depending on the business cycle at which we refer. These levels differ, ultimately, by the time horizon that includes the study, being able to distinguish between the quantification of long cycle or capital cycle, and on the short-term or operating cycle (bm.gduf.edu.cn).
The Capital Budget is a tool used for the costs planning process for the assets of the company, whose economic benefits are expected to extend in terms of more than one fiscal year. The capital budget is a list of projects valued presumed to be achievable for the acquisition of new fixed assets, i.e. when a company makes an investment commodity incurs capital output current cash, hoping to change future benefits. At Overall, these benefits extend beyond one year in the future. Examples include investment in assets such as equipment, buildings and grounds, and the introduction of a new product, a new distribution system or a new program to research and development. Therefore, the future success and the profitability of the company depend on investment decisions that have been taken today (www.bschool.nus.edu.sg/). Classification
The classification of projects based technique is varied, the most important are:
New products or expansion of existing products.
Replacement of equipment or buildings.
Research and development.
Other (e.g., safety-related devices or control of pollution)
The most Capital budget options used for invest project are:
A company may be required to do certain investments to prevent environmental pollution, or improve certain facilities to prevent industrial risks (www.pyramidsystems.com/).
This included construction of the gyms or pools for workers. This can be considered as intangible assets for workers or employees in order to improve productivity.
The Replacement of equipment or buildings or replacement
Such as, maintenance of business consisting of continued ...