capital budgeting flashcards

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What does the term "capital budgeting" describe? Capital Budgeting is used to describe how managers plan significant investments in projects that have long–term implications such as the purchase of new equipment or the introduction of new products.
Which two broad categories does Capital budgeting fall under? Screening decisions and preference decisions.
What are screening decisions? These decisions relate to whether a proposed project is acceptable; the required rate of return is the minimum rate of return a project must yield to be acceptable.
What are preference decisions? These decisions relate to selecting from several acceptable alternatives.
Why is it important to recognize the time value of money when evaluating investment proposals? Because capital investments usually earn returns that extend over long periods of time.
what is capital budgeting the process of identifying and evaluating capital projects, that is projects where the cash flow to the firm will be received over a period longer than a year.

What does the term "capital budgeting" describe?

Which two broad categories does Capital budgeting fall under?

What are screening decisions?

What are preference decisions?

Why is it important to recognize the time value of money when evaluating investment proposals?

what is capital budgeting

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