Question

Describe the capital budgeting process.

Short answer

The capital budgeting process is linked with the allocation of funds into the capital assets for the growth of the business.

Step-by-step solution

Meaning of Budgeting

Budgeting is the process of estimating the future expected revenues and expenses associated with a business entity. Budgets are prepared separately for all the segments of a business and are used to determine growth.

Capital budgeting process

The capital budgeting process refers to the way of organizing and allocating the funds into the capital assets that result in good returns.

In addition, the capital budgeting process passes through four major stages:

1. Initially, this process requires thedevelopment of strategies.
2. Appropriate planning must be done in order toallocate the funds.
3. Implementation of thestrategies and planning.
4. Controlling thevariances in the outcomes.