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What are the difference between cash budgeting and capital budgeting?
Wiki User
∙ 14y ago
capital expenditure budget is a part of cash budget.cash budget involves managerial activities while capital expenditure budget involves day to day activities may be for long range or short range
Wiki User
∙ 14y ago
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Should financing cost be included as an incremental cash flow in capital budgeting analysis?
Incremental Cash flows are included in capital budgeting decision and if capital budgeting decisions require acquisition of money from open market then its financial cost is also relevant for decision making and it is also included in it.
Why does capital budgeting look at cash flows and not net income?
Affect of net income is hard to determine due to any specific assets that's why capital budgeting decision making involves cash flows to determine cost and benefit analysis.
Why do Depreciation expenses affect capital budgeting analysis by increasing?
it is increasing the incremental cash flow
Which capital budgeting method uses accrual accounting rather than net cash flowsl as a basis for calculations?
apr
How do you compute the profitability index of a capital-budgeting proposal?
Dividing the present value of the annual after-tax cash flows by the cost of the project
Should financing cost be included as an incremental cash flow in capital budgeting analysis?
Incremental Cash flows are included in capital budgeting decision and if capital budgeting decisions require acquisition of money from open market then its financial cost is also relevant for decision making and it is also included in it.
What Capital budgeting decisions usually involve analysis of?
cash outflows only
What is capital budgeting analysis?
Capital budgeting analysis is the analysis of all cash inflows and outflows related with the underlying asset purchase decision to evaluate the cost and benefit of purchase of asset.
Why does capital budgeting look at cash flows and not net income?
Affect of net income is hard to determine due to any specific assets that's why capital budgeting decision making involves cash flows to determine cost and benefit analysis.
Why do Depreciation expenses affect capital budgeting analysis by increasing?
it is increasing the incremental cash flow
What is the difference between Days Working Capital and Cash Conversion Cycle?
There is no difference : DWC=DSO+DIH-DPO --> CashConversionCycle
What monetary standard can be used in foreign capital budgeting?
Foreign capital budgeting requires the use of foreign cash flows and local tax rates, but U.S. inflation rates and U.S. dollars at the current exchange rates can be used.
Why are Discounted cash flows the best basis for capital budgeting decision?
Discounted cash flows are the best basis for capital budgeting decision due to the singular fact that they recognise the time value of money. Capital budgeting decisions are long term investment that considers how much money invested now will yield an expected returns in the future and since money is time sensitive,the best way of capturing this is by using methods that recognises time lags,hence the use of discounted cash flows
Can Present value be added to determine the value of capital budgeting project?
As capital budgeting involve decision making which is for long term time period that's why time value of money imprecations are included while calculating capital budget and that's why present value of actual cash flows are used rather the real value of cash flows.
Which capital budgeting method uses accrual accounting rather than net cash flowsl as a basis for calculations?
apr
Why does capital budgeting rely on analysis of cash flows rather than on net income?
Cash flow rather than net income is used in capital budgeting analysis because the primary concern is with the amount of actual dollars generated. For example, depreciation is subtracted out in arriving at net income, but this non-cash deduction should be added back in to determine cash flow or actual dollars generated.
How do you compute the profitability index of a capital-budgeting proposal?
Dividing the present value of the annual after-tax cash flows by the cost of the project
