Capital Budgeting

Accounting term - SlickAccount
Capital Budgeting – SlickAccount

Capital Budgeting is a process which analyzes the frequency of return on long-term & short-term investments to be made by a business. Capital Budgeting is same as Investment appraisal.

Capital Budgeting is an important & complex task as the analysis needs to be accurate to determine the return value of investments.

Continue reading “Capital Budgeting”

What is Capital?

Capital is the total financial asset of a business. It includes cash-in-hand, cash-at-bank, building, furniture, machinery, land etc. Capital is categorized into two different types i.e. working capital, fixed capital.

Working Capital: Those assets or capital used or available for day-to-day operations are called as working capital.

To calculate working capital: working capital = current assets – current liabilities

Fixed Capital: Capital or assets like furniture, machinery is termed as fixed capital. Fixed capital is the biggest advantage for a business as these can be used in bad times to pay debts.