The Importance of Capital Budgeting

Topics: Management, Decision making, Entrepreneurship Pages: 2 (511 words) Published: October 14, 2012
The importance of capital Budgeting
In the world of business, capital budgeting is one of the most important steps that a company can take. Many in the business world do not properly understand the importance of capital budgeting. Here are the basics of capital budgeting and why it is important to businesses. What Is Capital Budgeting?

Capital budgeting is a process that attempts to determine the future. Before any large project begins, the capital budgeting process should be utilized. Without capital budgeting, your company could make a fatal mistake. Here are a few aspects of the capital budgeting process and why each one is critical to your success. Identify Opportunities

As a business owner or entrepreneur, you are often presented with many different potential opportunities. You could go in a number of different directions as a company. The first step in the capital budgeting process is identifying which opportunities are available to you at the time. Before you can make a decision he have to know what is available first. Assess Opportunities

Once you have identified the possible opportunities for your business, the next step in the process is to assess each opportunity individually. You to compare each opportunity against your vision for the company and the mission statement. Look at the values of each opportunity and see if they match with your own values. Many of the potential opportunities can be eliminated in the step before you can get into the financial information. You want only pursue opportunities that match your business plan. Cash Flow Assessment

Another vital part of the capital budgeting process is cash flow assessment. When looking at a new project, you to come up with a cash flow plan for it. You need to estimate the amount of cash that will take to complete the project and how much cash it will require going forward. This often requires the consultation of several different experts. For example, if you are considering starting a new...
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