capital budget 1

831 Words Feb 15th, 2014 4 Pages
Critically reflect on the importance of capital budgeting. Why is this heated subject in many boardrooms? How does capital budgeting promote the financial health of an organization? How will you use the financial techniques you have learned this week to promote the financial health of your organization?
A capital budget is very important for a business. It is a heated subject because a decision about capital budgeting can help the business to determine if the proposed investments or project are worth taking or not. There are two things that a business has to take into consideration when it is making a capital budget decision. First there are financial decisions that have to be made. Second, there is an investment decision that is also
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If the business was to make an investment on a project that was not right or not profitable the smart thing to do would be to not invest in the project or consider it at all. An investment that does not make any money can be wasteful for the business and make it lose a lot of money in the long run. That is why it is important for those who make the decision to evaluate all of their alternatives, risks, and returns, etc in order to decide on whether or not to reject or accept a project that it might have in mind.
As a result, to promote the financial health of any organization one should know the present value of the investment and have a good ideal of how long that investment will take to mature and give back returns. In order to create a capital budget I have to consider the needs of the organization, look at the finances, goals, and position that the business is. In doing I could make a decision about the needs of that business. Second, I would have to collect, compare, analyze, and evaluate the cash and financial statements in order to compare the cost and revenue. It would give me some lead way into the position of the business when it moves forward to the future. Third, the capital budget would have to be compared to the cash flow, because it will help me to know how important it is to make the investment only if it increases the financial bottom line and increase the total financial performance of the business. I can use the

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