One day my company boss tell me .. look Sam (Financial Manager).. we need a new machine for our new product making… take a capital budgeting decision.. ..
See this word Capital Budgeting… it says one clear thing .. ” make plan investment of your capital” .. as budget is a planned expenditure.. but now it’s about capital investment.. hence now “Capital Budgeting”
now what is capital budgeting.. sam was told for …
If u think of investing your company money as financial manager in a long term assets (machine or other) which is going to give you a benefit for a long period of time.. u are taking a capital budgeting decision..
They are important because once you take this decision your big chunk of money will remain invested in it for a long period of time… which u could have invested in some other ..important sources of income.. & some time once invested u cannot recover it easily.
Capital Budgeting 