Capital budgeting insights

The capital budget is critical; a company's capital budgeting decisions define its strategic direction and the results of capital budgeting decisions continue for many years, reducing flexibility. Carefully developed capital projects can save operating expenses by creating more efficient ways to provide services or by introducing energy-saving measures. The impact of capital expenditures on the operating budget should be carefully considered before capital budgets are made. For certain types of projects, a relatively detailed analysis may be warranted. For others, simpler procedures should be used. The cost of capital is affected by a number of factors. Those beyond a company's direct control are the level of interest rates, the market risk premium, and tax rates. But a company can control its cost of capital through its capital structure policy, its dividend policy, and its investment (capital budgeting) policy.

Learn more about capital budgeting and the CIO:
- read the article at CIO Update

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