About This Chapter
Capital Budgeting - Chapter Summary and Learning Objectives
Capital budgeting allows managers to assess projects in order to approve or deny them. Evaluating the techniques associated with capital budgeting will allow managers to make informed decisions. In this chapter, instructors will explain these techniques and focus on examples of how they are used. Engaging video lessons will explain the methods of capital budgeting. Lesson quizzes are available for you to test yourself on the subject matter. In this chapter, analyze material like:
- What capital budgeting is
- The cash payback technique and its uses
- How to evaluate a budget with the net present value method
- The intangible benefits method
- Managing the profitability index method
- Estimating the internal rate of return
- Ways to calculate the annual rate of return
|What Is Capital Budgeting? - Techniques, Analysis & Examples||Formulate a capital expenditure budget and understand its function.|
|Cash Payback Technique: Definition & Formula||Assess the cash payback technique and use the formula for computing the cash payback period.|
|Evaluating a Budget Using the Net Present Value Method||Explain the net present value method and learn to use it to evaluate budgets.|
|Net Present Value: Evaluating Estimates||Devise a way to evaluate estimates.|
|Intangible Benefits Method: Definition & Challenges||Analyze the challenges with intangible benefits in capital budgeting.|
|Profitability Index Method: Definition & Calculations||Evaluate the profitability index in capital budgeting and how to figure it.|
|How to Evaluate a Budget Using the Post-Audit Method||Analyze how the post-audit method is performed for capital budgeting.|
|Internal Rate of Return Method: Definition & Calculation||Focus on how internal rate of return is calculated.|
|Using the Annual Rate of Return Method to Evaluate a Budget||Judge the annual rate of return method for evaluating the capital budget.|
1. What Is Capital Budgeting? - Techniques, Analysis & Examples
Capital budgeting is important to the growth and development of a business. In this lesson, you will learn what capital budgeting is, why it is important, and how it is used.
2. Cash Payback Technique: Definition & Formula
When determining whether or not to make a capital investment, the cash payback technique is useful for providing a quick estimate to see if a project is worth further attention. In this lesson, we will look at the cash payback technique in more detail, as well as learn the accompanying formula.
3. Evaluating a Budget Using the Net Present Value Method
Explore the net present value method of capital budgeting and the associated decision rules for accepting or rejecting capital projects. Evaluate a capital budget and decide which projects should be accepted.
4. Intangible Benefits Method: Definition & Challenges
Many factors of a business' success are hard to quantify. From brand recognition to employee loyalty, intangible benefits can have a very real impact on a company's bottom line.
5. Profitability Index Method: Definition & Calculations
Ever wish there was an easy way to quickly calculate if a business endeavor was worth your time and resources? The profitability index method gives you just such a way to quickly check the nature of a project.
6. How to Evaluate a Budget Using the Post-Audit Method
In this lesson, you'll learn how using the post-audit method can be a valuable tool in evaluating whether a capital budget is performing as expected. You'll also see how this method can help a company reach its capital budgeting goals.
7. Internal Rate of Return Method: Definition & Calculation
Financial management involves determining which long-term investments are right for a company. There are several techniques used by management to analyze potential investments and determine their worthiness. One technique is the internal rate of return method.
8. Using the Accounting Rate of Return Method to Evaluate a Budget
After reading this lesson, you'll know the formula you need to calculate the accounting rate of return. You'll also understand how to use the accounting rate of return method in deciding whether a capital budget decision is a good one or a bad one.
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Other chapters within the Accounting 301: Applied Managerial Accounting course
- Corporate Governance for Managerial Accounting
- Financial Statements & Balance Sheets
- Cost Classifications
- Manufacturing Overhead Cost Allocation
- Job Order Cost System
- Process Cost System
- Activity-Based Costing
- Cost-Volume-Profit Analysis
- Decision Making in Managerial Accounting
- Pricing Objectives & Methods
- Budgetary Control
- Standard Costs
- Statement of Cash Flows
- Financial Statement Analysis
- Software for Managerial Accounting
- Required Assignments for Accounting 301
- Studying for Accounting 301