Capital budgeting refers to the process and planning of a business's long-term activities and investments. As a business owner or manager, it is in your best interest to ensure the longevity of your offerings. Therefore, having a capital budgeting plan can help you achieve this more effectively. Questions that are addressed by a capital budget in that regard are:
What long-term assets should you invest in?
What line of business should you enter?
What kind of fixed assets might you need to help create value?
When the answers to these questions all allude to value creation that is well justified and actionable, then the capital budget plan is more likely to be effective than a short-term projection.
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