What is the relationship between profit and capital budget expenses?

Expert Solution

Finance department prepares the capital expenditure budget to plant new equipments or diagnostic machines which is needed for the current year based on the funds available to the Enterprise. It provides data for long range financial plan and annual goal for investment. It helps to prevent distortion of costs or benefits in proposals. The budget for capital expense will be developed and approved separately. The major objective of the institution or company is profit. The purpose of budget made for capital expenditure is to gain profit. Profit is the difference amount of amount received from the customer for the service and the amount utilized to buy gods or equipments to the customer service. The more you invest on your capital budget you will get more profit returns as you give satisfactory customer services. The capital budget comes from profit. So initial expense can significantly reduce short term profit.

Nightingale answered 2 years ago

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