Question

In: Finance

Do capital budgets have any impact on operating budgets? What are some reasons that capital asset...

Do capital budgets have any impact on operating budgets? What are some reasons that capital asset acquisition decisions receive particular attention? Can capital budgets be consolidated into operating budgets to simplify the budget process? Explain

Solutions

Expert Solution

Yes capital budgeting decides the extend to which a companies operation happens and the capital items are depreciated on a yearly basis and is shown as depreciation cost which is included in Operation budget.

Capital budgeting recieves particular attention because

  • Strategic decision which have long term impact for the company
  • Investment is large compared to the amount allocated to operation budget
  • FInancial impact is difficult to validate and hence budget should be precise
  • Small mistakes in budget can leads to huge losses

No. capital budget cant be merged with operating budgets to simplify the process. Operating budget is short term and consider all the expenses and revenue only to the current financial year. Whereas Capital budget is for long term and cost and return is estimated for over a period of time. Hence merging both of these is not recommended and will cause further complications rather than simplifying it.


Related Solutions

Explain the differences between purchasing an asset and leasing an asset. What are some "good" reasons...
Explain the differences between purchasing an asset and leasing an asset. What are some "good" reasons for opting to lease rather than purchase an asset? What are typical incremental cash flows, and how do you determine the net advantage to leasing
What are the components of the operating Budgets? How are the operating budgets, cash budget, and...
What are the components of the operating Budgets? How are the operating budgets, cash budget, and budgeted balance sheet interrelated?
a) What impact, if any, do regulatory activities have on the ethics of the WorldCom case?...
a) What impact, if any, do regulatory activities have on the ethics of the WorldCom case? If not applicable to this case, discuss possible overall impacts of regulatory activities for ethical situations in general.
What is a capital asset? What is basis? How is basis adjusted? What are some capital...
What is a capital asset? What is basis? How is basis adjusted? What are some capital assets that you have (list 10 that are not securities)? How would you be taxed on each asset if you were to sell it today?
What do you think were some reasons why the courts at first tended to support capital...
What do you think were some reasons why the courts at first tended to support capital against labor in the early 19th century? Why do you think that view gradually changed?
Investigate how corporations allocate capital budgets. How do these methods impact the decisions made on investing...
Investigate how corporations allocate capital budgets. How do these methods impact the decisions made on investing or not investing in new projects?Explain in details
What impact, if any, do you expect the COVID-19 pandemic to have on willingness to get...
What impact, if any, do you expect the COVID-19 pandemic to have on willingness to get the flu vaccine?
What information is necessary for the operating budgets?
What information is necessary for the operating budgets?
based on any capital budgeting journa Discuss why do managers focus on the impact that an...
based on any capital budgeting journa Discuss why do managers focus on the impact that an investment will have on reported earnings rather than on the investment’s cash flow consequences? please explain in detail with examples for 3-4 paragraph.
based on any capital budgeting journal Discuss why do managers focus on the impact that an...
based on any capital budgeting journal Discuss why do managers focus on the impact that an investment will have on reported earnings rather than on the investment’s cash flow consequences?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT