MONEY MATTERS

The most vital aspect of the business is undoubtedly, capital management. Capital management is the most interesting and valuable work at the top management level. A business firm cannot remain static; its tendency is either to move forward or backward. Only when there is adequate financial resources, expansion can take place. Capital management is concerned with finding adequate resources and utilization of resources in the most effective manner. It is done so that, the returns will be increasing for the firm’s investments.

Capital budgeting is the vital component of capital management. It is a multi- dimensional activity which embraces searching for new and more profitable investment proposals, and to determine the profit- potential of each investment proposal.

Capital budgeting is nothing but planning of expenditures for assets, which will yield a series of returns over future time periods. Capital budgeting is also described as investment decision making or equipment replacement policy or capital expenditure analysis. Prof. Joel Dean says that, planning and control of capital expenditures is the basic executive function, since management is originally hired to take control of stockholders’ funds and to maximise their earning power.

Capital budgeting encompasses topics such as the selection of projects, the timing of investment, the determination of amount to be invested within any given time period, and the arrangement of the financial means necessary for the completion of the projects.

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