Question

Research, define, describe, and explain the above-mentioned (Minimum 250 words answer for each questions)

1. What is capital budgeting?

2. What is an operating budget?

3. Explain capital structure.

4. Explain what financing instruments are and discuss options, futures, derivatives and securities valuation.

5. Explain what the money market is and market efficiency

6. List three different types of financial ratios and explain them

Answer 1

Capital Budgeting

Capital budgeting is a technique of planning of Capital expenditure like purchasing of long-term assets, expansion of business plan research and development.

It consists of evaluating the investments and invest in such a way which will provide best returns on the investments.

An organisation face lots of challenges while working on capital budgeting specially when there is lots of projects available in the market, or how to raise your capital like debt or equity.

Capital budgeting requires lots of research, so that best decision should be taken with minimum quantum of risk on projects.

The objectives of capital budgeting are as follows:

1. Select the project which has maximum profits.
2. Control in Capital Expenditure.
3. Raising source of funds with less risk or less cost (Debt or Equity)

The process to be followed for the capital budgeting is as follows: -

1. Identification of investment opportunities.
2. Evaluation of investment proposals.
3. Choosing the project which will leads to most profitable.
4. Perform capital budgeting and do the apportionment of cost.
5. Regular check of performance review and do the follow up for future.

The various kinds of Capital Budgeting Techniques are as follows: -

1. Payback period Technique.
2. Net Present value Technique.
3. Accounting Rate of Return.
4. Internal Rate of Return.
5. Profitability index.