7.1 : 資本予算の概要

Capital budgeting is the process that businesses use to evaluate and decide on investments in long-term assets.

These decisions involve assessing potential projects or investments to determine their profitability and impact on the company's future financial health.

The goal is to choose investments that will increase the value of the firm to its shareholders.

Let us consider Blue Construction Company.

The company has decided to invest in new heavy machinery for its ongoing infrastructure project.

The Finance team conducts a capital budgeting analysis.

With this analysis, they estimate the initial cost of the equipment, ongoing maintenance expenses, and the equipment's expected lifespan.

The company also estimates the potential incremental revenue from increased productivity.

This evaluation allows the finance team to make an informed decision about whether the investment aligns with the company's long-term goals and financial objectives.

Ultimately, capital budgeting helps the company allocate its resources effectively, maximize profitability, and grow its operations in a competitive market.