please discrete the difference between capital planning and capital budgeting.

Expert Solution

Capital planning vs capital budgeting:

Capital planning has a very large scope. Capital budgeting is a subset of capital planning.

Capital budgeting involves the evaluation of various investment proposals and identifying the most profitable investment available to do business.

Where was capital planning involves:
Resource optimisation, sale schedule, operational and working capital budgets, capital expenditure estimation, budgets and various financial models.

Capital budgeting does not consider the macroeconomic factors in particular.

Whereas capital planning considers various economic factors including micro-macro and international whichever can affect the business.

Capital budgeting on the other hand look at how to increase the profit by various investments alternatives by means of methods like net present value or internal rate of return.

Capital planning is done with a goal to increase the value of shareholders by means of wealth maximization.

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