What is Capital Budgeting?

Somtochukwu

Resources can either be consumed in the present of invested to generate future consumption. The choice between current consumption and investments is made in order to achieve ‘inter-temporal balance’ between current bland future consumption – Wirschleifer, 1980.

Such that, the more current consumption that is sacrificed, the more future consumption that will accrue and vice versa.

Investment is expenditure on long term and fixed assets. Consequently, the proportion of current resources which is to be invested in long term asset is ‘capital budget’ while the process of allocation of scarce resources among long term assets is called Capital Budgeting.

Capital Budgeting as a process is made of three (3) stages which are;

Project Generation

Project Evaluation and

Project Selection

 Click here to save this Post as PDF
Let us connect on social media forever;
Follow me

Somtochukwu

Visionary Leader and Development Economist in Nigeria. CEO at Bufiredd Economic Consults Ltd
Avatar
Follow me

Leave a Reply

Your email address will not be published. Required fields are marked *