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Capital Budgeting - Statistics Project Example
Author : simonisgarret
Pages 21 (5271 words)
Business firms need finance mainly for two purposes - to find the long-term decisions and for meeting the working capital requirements. The long-term decisions of a firm involve setting up of the firm, expansion, diversification, modernization and other similar capital expenditure decisions (ICMR), 2003)…
One of the most important considerations for an investment and financing decision will be proper asset-liability management. Companies will have to face a severe asset-liability mismatch if the long-term requirements are funded by the short-term sources of funds. Such a mismatch will lead to an interest risk thereby enhancing the interest burden of the firm and a liquidity risk with the short-term funds being help up in long-term projects.
Whenever a business firm plans to invest in a long-term project, it needs to assess the benefits that can be reaped out from that particular long-term investment and come to a conclusion whether that particular investment is profitable for the business or not. The entire process of assessing a proposed long-term investment and coming to a conclusion whether it is worth investing or not is termed as "Capital Budgeting."
The ultimate goal of any individual or a firm's maximization of profits or rate of returns - in other words market value of one's investments. Thus, investment management is an ongoing process which needs to be constantly monitored by way of information as this may affect the value of securities or rate of returns of such securities. ...
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