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What are the techniques used to make capital budgeting decisions in your organisation?
discuss the various methods adopted for a capital budgeting decision.
Which capital budgeting method uses accrual accounting rather than net cash flowsl as a basis for calculations?
apr
Distinguish between IRR and ARR method in capital budgeting?
arr is for 1year only..irr can be for a period of 1 or more years
Which capital budgeting approach ignores this concept?
The capital budgeting approach that ignores the concept of the time value of money is the payback period method. This method focuses solely on the time it takes to recover the initial investment without considering the future cash flows' present value. As a result, it does not account for the opportunity cost of capital or the potential growth of money over time. This limitation can lead to suboptimal investment decisions.
What is zero based budgeting?
Zero-based budgeting is a method of budgeting where all the expenses have to be justified for each new period. This method starts with a zero base and all the functions in a company are analyzed for costs and needs.
Which method of evaluating capital budgeting projects is generally regarded by academics as being the best single method?
The Net Present Value (NPV) method is generally regarded by academics as the best single method for evaluating capital budgeting projects. This is because NPV accounts for the time value of money, providing a clear measure of the projected profitability of a project by discounting future cash flows to their present value. A positive NPV indicates that a project is expected to generate value over its cost, guiding investment decisions effectively. Additionally, it aligns with the goal of maximizing shareholder wealth.
Which capital budgeting valuation method is most preferred?
When it comes to capital budgeting, a project valuation using the discount cash flow method is widely used. However, visit these sites for detailed information: * http://www-128.ibm.com/developerworks/rational/library/nov05/mckenna/ * http://www.eventuring.org/eShip/appmanager/eVenturing/eVenturingDesktop?_nfpb=true&_pageLabel=eShip_articleDetail&_nfls=false&id=Entrepreneurship/Resource/Resource_223.htm * http://en.wikipedia.org/wiki/Valuation_(finance)
What method of budgeting is being employed when expenditures are allocated by an analysis of expenditures for all aspects of producing and marketing of a product?
The method of budgeting being employed is known as "activity-based budgeting" (ABB). This approach focuses on analyzing the costs associated with specific activities required to produce and market a product, allowing for a more precise allocation of resources based on actual operational needs. By examining the expenditures tied to each activity, organizations can identify areas for efficiency improvements and better align their budget with strategic goals.
What is the NVP method?
The Net Present Value (NVP) method is a financial analysis tool used to evaluate the profitability of an investment or project. It calculates the present value of expected cash inflows and outflows over time, discounting them to account for the time value of money. A positive NVP indicates that the projected earnings exceed the anticipated costs, making the investment potentially worthwhile, while a negative NVP suggests that it may not be a good financial decision. This method is commonly employed in capital budgeting and investment decision-making processes.
What is traditional budget?
Traditional budgeting is the amount of money that you allot for a period of time that is for a specific financial obligation. These would be for insurance, rent or entertainment.
Is wargaming the most sophisticated method of COA analysis?
Yes, wargaming is the most sophisticated method of COA analysis.
What are the weaknesses of the payback method?
the payback method ... is a method to evaluate the project in capital budgeting ... or simply in a long term dicision making for the entity .and because it is a long term in nature ..... the risk is high ... by evaluatining methods ... we try to reduce the uncertinity ... one of the methods ...is payback method . the disadvantage of the payback method is ...it does not concern with the time value of money theory ....the second one is ...it ignore the incash flow and the outcash flow of the project , after the payback period .
