Question

In: Finance

Which of the following statements is CORRECT? A) Capital budgeting is the process by which a...

Which of the following statements is CORRECT?

A) Capital budgeting is the process by which a firm selects the different amounts and types of capital it should finance its investments with.

B) Capital budgeting is generally a short-term decision.

C) Capital budgeting is the process by which a firm analyzes alternate projects and chooses the project(s) it wants to invest in.

D) Capital budgeting has little to no impact on a firm’s future strategic direction.

Solutions

Expert Solution

C.Capital budgeting is the process by which a firm analyzes alternate projects and chooses the project(s) it wants to invest in.

Explanation

Capital budgeting decisions may be generally needed for the following purposes:
(a) Expansion; (b) Replacement; (c) Diversification; (d) Buy or lease and (e) Research and Development.

Capital budgeting decision may be defined as Firms decisions to invest its current funds most efficiently in long term activities in anticipation of an expected flow of future benefits over a series of year.

jeff jeffy answered 2 years ago
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