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Ebook Financial management: Part 2

(BQ) Part 2 book "Financial management" hass contents: Capital budgeting, working capital, working capital management, special financing, financial system, share market terminology, financial markets. | INTRODUCTION The word Capital refers to be the total investment of a company of firm in money, tangible and intangible assets. Whereas budgeting defined by the “Rowland and William” it may be said to be the art of building budgets. Budgets are a blue print of a plan and action expressed in quantities and manners. The examples of capital expenditure: 1. Purchase of fixed assets such as land and building, plant and machinery, good will, etc. 2. The expenditure relating to addition, expansion, improvement and alteration to the fixed assets. 3. The replacement of fixed assets. 4. Research and development project. Definitions According to the definition of Charles T. Hrongreen, “capital budgeting is a long-term planning for making and financing proposed capital out lays. According to the definition of G.C. Philippatos, “capital budgeting is concerned with the allocation of the firms source financial resources among the available opportunities. The consideration of investment opportunities involves the comparison of the expected future streams of earnings from a project with the immediate and subsequent streams of earning from a project, with the immediate and subsequent streams of expenditure”. According to the definition of Richard and Green law, “capital budgeting is acquiring inputs with long-term return”. According to the definition of Lyrich, “capital budgeting consists in planning development of available capital for the purpose of maximizing the long-term profitability of the concern”. Financial Management 120 It is clearly explained in the above definitions that a firm’s scarce financial resources are utilizing the available opportunities. The overall objectives of the company from is to maximize the profits and minimize the expenditure of cost. Need and Importance of Capital Budgeting 1. Huge investments: Capital budgeting requires huge investments of funds, but the available funds are limited, therefore the firm before investing projects, plan are control