COMM-2016EL Study Guide - Final Guide: Capital Budgeting, Cash Flow, Net Present Value
29 Oct 2017
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Document Summary
In the role of a management accountant, you can help managers make smart financial decisions. Management accountants are problems solvers, analyzing many investment opportunities and recommending the best alternative. Capital budgeting is a process used to determine the impact of future capital purchases. Think of (cid:498)capital(cid:499) as a significant investment (purchase) that will last years and years. These capital items will contribute to operations, reduced expenses or increase production. Therefore, with any major purchase you will need to determine the effect on cash flows for many years to follow. These are the decisions made daily for all types of organizations; educational institutions, government, not for profit organizations and profitable companies. The overall purpose of utilizing a capital budgeting model is to determine if your investment has a positive impact to you today (in the present time). Capital budgeting decisions compare a possible investment with a continuation of the status quo.
