A. Preparation of Capital Budget and Appropriation
B. Performance Review
C. Assembling of Investment proposals
D. Identification of Investment opportunities
E. Decision Making
Choose the correct answer from the options given below:
Capital Budgeting Process: Correct Sequence
The capital budgeting process involves several key stages to ensure efficient allocation of funds for long-term investments. Arranging these steps correctly is crucial for effective financial decision-making.
Steps in Order:
- D. Identification of Investment Opportunities: This initial phase involves recognizing potential projects or investments where the company could deploy its capital.
- C. Assembling of Investment Proposals: Once opportunities are identified, detailed proposals are prepared, outlining the scope, costs, expected returns, and risks associated with each potential investment.
- E. Decision Making: Based on the analysis of the assembled proposals (often involving techniques like Net Present Value, Internal Rate of Return, Payback Period), management selects the most viable projects.
- A. Preparation of Capital Budget and Appropriation: The chosen projects are incorporated into the overall capital budget, and funds are formally allocated (appropriated) for their execution.
- B. Performance Review: After implementation, the actual performance of the investment is monitored and compared against the projected outcomes to assess efficiency and identify any necessary adjustments.
Therefore, the correct sequence of the Capital Budgeting Process is D, C, E, A, B.
Important Questions from Capital budgeting decisions
Zero Based Budgeting (ZBB) lays emphasis on:
A. Allocation of resources based on cost-benefit terms
B. Unlimited deficit financing
C. Preparing a new budget right from the scratch
D. Preparing the budget, neglecting the history of expenditure
Choose the correct answer from the options given below:
Under which of the following situations the decision outcome on evaluation of investment opportunities vary under NPV and IRR methods per se?
a) Time disparity
b) Cost disparity
c) Life disparity
d) Volume disparity
Choose the correct combination of situations:
Which one of the following methods of Capital Budgeting assumes that cash-inflows are reinvested at the project’s rate of return ?
Which of the following variables is not known in Internal Rate of Return methods of capital budgeting?
Indicate the correct code for discounted cash flow techniques for capital investment proposals from the following:
(i) Net Present Value Method
(ii) Internal Rate of Return method
(iii) Excess Benefit-Cost Ratio method
(iv) Net Terminal Value method
Choose the correct answer from the code given below :
