REASONS WHY CAPITAL BUDGET IS GIVEN ATTENTION Name Prof Institution Subject Code Introduction The future survival and productivity of almost all business entities from small to big, Public Companies to privately owned firms and largest international corporations depend on the well judged acquirement, maintenance, and disposal of capital assets…
Capital assets receive attention because they commit a firm for long term. These capital assets are commitment of over a year and sometimes for decades for instance, real estate. Economically, the resources being scarce and competitive in nature, there would be wrong allocation of such resources at the wrong time or on a non rewording asset. Assets acquisition analysis According to (Baker, & Powell, 2005) any company will invest finance for the sake of gaining a return which is useful for four focal reasons: 1. To recompense the shareholders or owners of the enterprise for staking their money and by sacrificing their current purchasing power for the sake of current and future cash flow 2. To reward lenders by paying them regular return on their money borrowed in the form of interest and principal repayment as and when it falls due. 3. To be able to plough back retain part of their earnings for the purpose which facilitates not only the companies’ short term growth and long term growth but also has the implication of increasing the size of the company in terms of sales, in assets as well as shareholders wealth. 4. To increase the share prices and thus the credibility and goodwill of the company and its capability to raise further finance. Such return is necessary to keep the company’s operations moving straightforwardly and efficiently thus allowing the above objective to be accomplished. A financial manager and decision makers must present investment policies which will be concerned with how efficiently the company’s funds are invested because it is from such investment that the company will survive. The investments are important because: They influence company’s size, Influence growth Influence company’s risks In addition, to this investment decision making process which is also known as capital budgeting, involves the decision to invest the company’s current funds in viable ventures whose returns will be realized for long term periods in future. Capital budgeting as financial planning is characterized by the following: a. Decisions of this nature are long term i.e. extending beyond one year in which case they are also expected to generate returns of long term in nature. b. Investment is usually heavy (heavy capital injection) and as such has to be properly planned. c. These decisions are irreversible and any mistake may cause the company heavy losses. Importance of Investment Decisions 1) Such decisions are importance because they will influence the company’s size (fixed assets, sales, and retained earnings). 2) They increase the value of the company’s shares and thus its credibility. 3) The fact that they are irreversible means that they have to be made carefully to avoid any mistake which can lead to the failure of such investment. 4) Due to heavy capital outlay, more attention is required to avoid loss of huge sums of money which in the extreme may lead to the closure of such a company. However, these decisions are influenced by: I. Political factors – Under conditions of political uncertainty, such decisions cannot be made as it will entail an element of risk of failure of such investment. Thus political certainty has to be analyzed before such decisions are made, such factors must be taken into account such that the company forecasts the inflows and outflows within given. Limitations such as the ...
Cite this document
(“Capitol Budgeting Long Term Financing Assignment”, n.d.)
Retrieved from https://studentshare.net/finance-accounting/77034-capitol-budgeting-long-term-financing
(Capitol Budgeting Long Term Financing Assignment)
“Capitol Budgeting Long Term Financing Assignment”, n.d. https://studentshare.net/finance-accounting/77034-capitol-budgeting-long-term-financing.
The methodology provides a description about four short term finance sources availed by the businesses. Each one is separately described. Subsequent to that, the liquidity and efficiency ratios of Sainsbury and Tesco have been computed and compared. Four different sources of short term finance Short term finances fulfil the day-to-day operations of business.
There are several ways of raising short term funds for the business which are: a. Commercial Loan and bank overdrafts Commercial loans are loans usually provided by banks for the financing needs of a business. Commercial banks typically offer straight term loans to credit lines that would be used in the various operation of the business (Raiborn 2010).
Considering the fact that Wal-Mart is a publicly listed company, managers of this company should not only adhere strictly to Capital Market Regulations but should also take into account the extent at which government regulations may impact their business operation (Ghuman & Aswathappa, 2010).
While operating in such a market environment, the pricing strategy of a company will be greatly affected by the prices of other marketers. Therefore, it is not possible for a firm to set higher prices unless all the market players mutually agree with such a practice.
The different type of financing options available for the company is debt financing and equity financing. In debt financing, the company can acquire loan through bank, commercial paper, creditors and bond issuance. On the other hand, in equity financing, the company can obtain funds by issuing shares publicly both common and preferred.
d that found in the notes to the financial statements, briefly summarize the significant changes, if any, in the long-term liability accounts during the most recent year.
There was one major significant change in the long-term liabilities of the company and involved long-term
An operating budget should be ready for an annual operational cycle. Types of operating budgets include; the sales budget, production budget, labour budget. Capital budgets in a company use up a lot of money in catering for
The implicit memory makes him remember how to use the tools even though he does not remember their names. Remembering names is in semantic memory under explicit memory together which what he recently learnt in computer and
The present research has identified that in many cases, the government relies on the private sector for the providence of commercial goods and services. Although some tasks are specifically carried out my government personnel however others are completed as part of contracts. Performance is a key consideration when contracting certain tasks to the private sector.
5 Pages(1500 words)Assignment
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Assignment on topic Capitol Budgeting Long Term Financing for FREE!