How an organization allocates its cash and resources
Corporate finance
Working capital
Cash conversion cycle
Return on capital
Economic value added
Just-in-time
Economic order quantity
Discounts and allowances
Factoring
Reverse factoring
Sections
Managerial finance
Financial accounting
Management accounting
Mergers and acquisitions
Balance sheet analysis
Business plan
Corporate action
Social components
Financial law
Financial market
Financial market participants
Corporate finance
Personal finance
Peer-to-peer lending
Public finance
Banks and banking
Financial regulation
Clawback
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Capital budgeting in corporate finance, corporate planning and accounting is an area of capital management that concerns the planning process used to determine whether an organization's long term capital investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structures (debt, equity or retained earnings). It is the process of allocating resources for major capital, or investment, expenditures.[1]
An underlying goal, consistent with the overall approach in corporate finance,[2] is to increase the value of the firm to the shareholders.
Capital budgeting is typically considered a non-core business activity as it is not part of the revenue model or models of most types of firms, or even a part of daily operations. It holds a strategic financial function within a business. One example of a firm type where capital budgeting is plausibly a part of the core business activities is with investment banks, as their revenue model or models rely on financial strategy to a considerable degree.[3][4][5][6]
For the budget allocated to ongoing expenses and revenue, see operating budget.
^O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. pp. 375. ISBN 0-13-063085-3.
^See Corporate Finance: First Principles, Aswath Damodaran, New York University's Stern School of Business
^Pinkasovitch, Arthur. "An Introduction to Capital Budgeting". Investopedia. Retrieved 1 October 2022.
^Geijsbeek, William R. Jr.; Schall, Lawrence D.; Sundem, Gary L. (1978). "Survey and Analysis of Capital Budgeting Methods". The Journal of Finance. 33 (1): 281–287. doi:10.2307/2326365. JSTOR 2326365. Retrieved 1 October 2022.
^Hub City Lending, 23 January 2023
^Mao, James C. T. (1970). "Survey of Capital Budgeting: Theory and Practice". The Journal of Finance. 25 (2): 349–360. doi:10.1111/j.1540-6261.1970.tb00513.x. JSTOR 2325481. Retrieved 27 May 2023.
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