Why should a capital budget be flexible?

Solutions

Expert Solution

capital budget:- capital budget may be defined as the statement showing the expenditure and revenue the associated with the acquisition of capital assets. The capital budgeting techniques are used to determine the worth of long term investments in a company. capital budget should be flexible as it is depends on factors like structure of capital, interest rates offered by financial institutions, methods of accounting.

structure of capital:- The capital structure is changes from time to time based on the availability of capital in the company. some times the company may go for debt structure and some times for equity in this case it is necessary to change the budget that is prepared for the acquiring the capital. The price of capital assets will not be same in all cases sometimes it will be high and some times it will be low.

Rate of interest:- The rate of interest charged by financial institutions keeps on changing from time to time. it depends the economic situations and exchange rates all over the world.The exchange rates all over the world are fluctuating from time to time so it is required to prepare budget based on the budget so it should be flexible.

methods of accounting:- Methods of accounting policies and practices keeps changing from time to time, the rate of depreciation that is charged on fixed assets will also effect the resale of fixed assets so while preparing the capital budget it should be included.The budget should be flexible in order to change with the change in accounting policies and practices.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Why companies should have a flexible budget. Please answer in word format and in 350 words....

Why companies should have a flexible budget. Please answer in word format and in 350 words. Thanks

What is a flexible budget? What types of organizations might use flexible budgets? Why are flexible...

What is a flexible budget? What types of organizations might use flexible budgets? Why are flexible budgets useful?

Why is a flexible budget much more informative for comparison than a static budget? At the...

Why is a flexible budget much more informative for comparison than a static budget? At the beginning of the year, Long, Inc. estimates factory overhead to be $50,000 based on 40,000 units. Long believes there is $1 variable overhead per unit produced and $10,000 fixed costs. At the end of the year, 62,000 units were produced at a cost of $80,000. What amount would a flexible budget estimate for total factory overhead at a production level of 62,000 units? What...

What is a static budget? What is a flexible budget? Which is more useful, and why?...

What is a static budget? What is a flexible budget? Which is more useful, and why? Cite any references used. Participate in follow-up discussion by reviewing your classmates' posts, adding additional information, asking questions, or responding to follow-up questions posed by your instructor.

A flexible budget provides estimates of what revenues and costs “should be”. If we are trying...

A flexible budget provides estimates of what revenues and costs “should be”. If we are trying to compare actual costs to “budgeted” costs, why is comparing actual costs to the flexible budget better than comparing them to the static/planning budget? 2)Explain why a business could have a favorable material price variance but an unfavorable material quantity variance. Don’t just explain the math. Provide a real world scenario. 3Simply looking at overall spending variances tells us what’s different. Why is it...

What is a flexible budget?

1. Which of the following statements is true concerning the flexible budget? a. The flexible budget...

1. Which of the following statements is true concerning the flexible budget? a. The flexible budget shows the expected relation between costs and volume. b. The flexible budget has a fixed cost component which is expected to be incurred regardless of the level of activity. c. The flexible budget has a variable cost per unit of activity component where variable costs change in total as the level of activity changes. d. all of the above. 2. What is the...

1. Explain the three types of flexible budget variance and why it is important for every...

1. Explain the three types of flexible budget variance and why it is important for every manager to understand these variables. 2. In one paragraph, present a practical application of Price Variance as a Manager. Use all appropriate formulae as necessary. 3. As the Manager of Walker Jones Memorial Hospital, you projected financial outcomes for 5 medical units in the hospital known for adding up to $ 30,000,000 all together of revenue to the hospital. The total cost of operating...

The Federal Budget Why do you believe the federal budget should be reduced or balanced? Why...

The Federal Budget Why do you believe the federal budget should be reduced or balanced? Why do you believe the national debt should be reduced? What is the risk in reducing them, and what is the risk in failing to reduce them? What would you do if you had a magic budget wand, and you could make three changes to the way we raise federal revenues on an annual basis? Using that same wand what three changes would you make...

Does flexible budget variance analysis explain the cause of variances observed? Why is the pertinent to...

Does flexible budget variance analysis explain the cause of variances observed? Why is the pertinent to a nurse manager?

Subjects