StudentShare solutions
Triangle menu

Planning and Controlling Capital Expenditures - Essay Example

Extract of sample
Planning and Controlling Capital Expenditures

Thus most companies hold on capital expenditures every year, in an attempt to continuously upgrade and improve things like facilities, vehicles, buildings and equipment. A capital expenditure is considered deductible since it represents an improvement to the business and this deducted takes place over a specific life of an item, after than all at once as in the case of repair or maintenance expenditures.
Sometimes it is cumbersome to determine the difference that exists in capital expenditure and a routine expense. Generally capital expenditure improves the worth of an asset while if it keeps the asset in working condition, it is referred to as routine expense. Hence, engaging in capital expenditure is a routine way of upgrading and expanding business whether done on a small scale or on a large scale (Pike and Neale, 2003). Large firms or corporations may acquire extra companies, as in the case of automotive giant which purchases another car manufacturer. Consequently, allowances are made in the budget of the company for the capital expenses, including the ones involving the replacement of items which are no longer repaired.
Capital expenditures thus normally yield benefit over a long period of time resulting into fixed assets. The resource constraint is a frequent phenomenon of all the economic activities in business. In addition, when a firm is able to spend on specific items it is not willing to do so (Nice, 2002). Therefore, a systematic screening is established to accept or reject the investment proposal. Investment proposal are divided into two groups that is: Mutually exclusive proposals and independent proposals. Mutually exclusive proposals are proposals that have an alternative of doing the same thing. If one alternative is selected then the other one must be rejected for example: if in plant material facilities are required, they are grouped according to their economic benefits. The economic benefits of each of the proposal will be evaluated and the one with the contributing maximum economic benefits is chosen while the rest with less economic benefits are rejected (Pike and Neale, 2003). Independent proposals are those items of capital expenditures that are always considered for different types of projects whose accomplishments are highly needed. In this case all independent proposals are independent of each other and are worthy for implementation. However, due to financial difficulties, priorities are assigned to each proposal according to the gravity of the need of the organization for example: in line with the material handling equipments, instruments such as machines for weighing, packing, stamping may be required(Cotts, 2007). Thus for mutually exclusive proposals the decision criterion is accept or reject while for independent proposals the decision criterion is mainly based in ranking. The decision taken is based on the methods of analyzing the capital budgeting decisions. The environment of capital expenditure proposals are widely grouped into: Expansion, Replacement, Diversification and Strategic proposals. Expansion proposals involve the capital expenditure to boost the production capacity within the same line of production (Shah, 2007).The investments are basically made in the familiar areas of activity as it involves minimal business risk as compared to diversification, however, larger risk than replacement expenditure. Replacement capital expenditure implies replacement of old machinery by a new one or a modern one. This replacement only ...Show more


Many public traded companies always list their capital expenditure annually in annual reports, with the aim that stockholders can see how the company is spending its money in planning long term decisions…
Author : runtearlene
Planning and Controlling Capital Expenditures
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Planning and Controlling Capital Expenditures"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Project management as a process of planning, arranging, motivating, and controlling resources
It is undertaken to meet objectives and unique goals in order to bring change and add value to the organisation (Choudhury, 1988, pp.1-2). The main challenge of project management is to accomplish all project goals and objectives. This paper will focus how the project management factors such as change management, risk management and team building contribute to the successful delivery of projects.
10 pages (2500 words) Essay
Pre-Contract Cost Planning and Cost Controlling
When undertaking a project such as construction, it is important for individuals involved to keep in mind cost planning as well as cost control. Cost control is a key objective in any given construction project and should, therefore, be recognized that, it is only achieved through the final decision of the manager (Potts, 2007, p.12).
9 pages (2250 words) Assignment
Marketing Planning
Therefore, this bank is highly influential and occupies an important position in international financial decision making process. At present, the bank serves approximately 58 million customers through its operations in more than 81 countries in all the continents.
20 pages (5000 words) Essay
Planning and Controlling Purchases and Materials Usage
Materials management activities related to purchasing, storing and providing goods and services for production are headed by the Purchase Manager and Stores Manager respectively. The quality, quantity, place and time for supply of materials are predetermined for smooth flow of production in the organization.
6 pages (1500 words) Essay
Planning and Controlling Direct Labor Costs
..…….………4 Conclusion……………………………………………………………………...…….………7 References……………………………………………………………………………..……..8 Introduction One of the issues commonly discussed in most boardrooms is the need to cut costs.
6 pages (1500 words) Essay
Capital Investment Process
As the investment process implies vast expenditures, most of the methods concentrate on the financial aspect of the matter, still recognising the importance of correlation to business strategy of a company. In reality, there are no clear answers made by those techniques as they rely on estimate data.
13 pages (3250 words) Essay
Weighted-average cost of capital and capital structure
On the one hand companies are trying to gain valuable support from the respective governments; while on the other hand, all efforts are being made to do away with undue expenditures, and making the capital structure optimal in efficiency.
4 pages (1000 words) Essay
Capital Planning
Internal rate of return is important to the business organization because it ascertains whether the project under consideration provides higher or lower rates of return than the one that can safely be obtained in
2 pages (500 words) Research Paper
Pre contract cost planning and pre contract cost controlling
Preponderances of the construction projects are facing uncertainty and risks that can result in escalation in costs and hence, the cost control is the method of combating the cost performance as compared to its cost plan, thereby fine-tuning one or the other functions
12 pages (3000 words) Essay
ikewise, in this paper we are going to discuss on how the government capitalizes on its resources to meet its expenses to cater for the public via budgeting. A budget is a quantitative plan of future intention. Therefore, capital budgeting is the process of using resources at
4 pages (1000 words) Research Paper
Comments (0)
Click to create a comment
Let us find you another Essay on topic Planning and Controlling Capital Expenditures for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
Join us:
Contact Us