Evaluating Business Investments Print Email

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Part 1	Introduction, Capital Budgeting, Capital Budgeting Models, Evaluating a Capital Expenditures, Noncash - Nondiscounted
Part 2	Cash Flows (CF), Nondiscounted CF Model, Discounted CF Models, Present Value Calculation

Introduction to Evaluating Business Investments

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Businesses often face the need to spend large amounts of money on assets that will be functional for many years. Here are a few examples:

• Equipment to improve an unsafe work situation or to protect the environment
• Equipment to test the consistency of products as required by the customer
• Equipment to package, label, and ship products according to the customer’s specifications
• Equipment to reduce labor costs and improve the quality of products
• Purchase of a building instead of leasing space

Expenditures made for long-term assets are referred to as capital expenditures and are recorded as assets on the balance sheet. During the years that these assets (other than land) are used, their costs are systematically moved from the balance sheet to the income statement through Depreciation Expense.

Source:
http://www.bized.co.uk/