Business Finance in mba

The total capital (long-term and short term ) of a company is employed in fixed and current assets of the firm. Fixed assets include those assets which are not meant for sale such as land, building, machinery etc. it is a challenging task before the management to take judicious regarding capital expenditures, i.e., investments in fixed assets to that the amount should not unnecessarily be locked up in capital goods which may have fa-reaching effects on the success or failure of an enterprise. A capital asset, once acquired, cannot be disposed of without any substantial loss and if it is acquired on long term credit basis, a continuing liability is incurred over a long period of time, and will affect the financial obligations of the company adversely. It, therefore, requires a long-range planning while taking decision regarding investments in fixed assets. Such process of taking decisions regarding capital expenditure is generally known as capital budgeting. In capital budgeting process, due consideration should b given to the following problems-