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                                                                                      5.1





                           OVERVIEW OF CAPITAL BUDGETING / H¡${nQ>b ~OqQ>J H$m AdbmoH$Z

                   Q.45. Explain the meaning of capital budgeting. Discuss its importance in financial decisions.
                         H¡${nQ>b ~OqQ>J H$m AW© g‘PmB¶o& ’$m¶Z|{e¶b {S>{gO§g ‘| BgHo$ ‘hÎd H$s ì¶m»¶m H$s{OE&
                                                           OR
                         Define capital budgeting. / H¡${nQ>b ~OqQ>J H$mo n[a^m{fV H$s{OE&
                                                           OR
                         Explain the meaning of capital investment budgeting. Also explain its classification.
                         H¡${nQ>b B§doñQ>‘|Q> ~OqQ>J H$m AW© g‘PmB¶o& BgH$m dJuH$aU ^r g‘PmB¶o&
                  Introduction                                n[aM`
                      One of the aspects of financial management  \$m`ZopÝe`c _¡ZoO‘|Q> H$m EH$ _hÎdnyU© nhby, \$ÊS>
                  is  proper  decision  making  in  respect  of  Ho$ BÝdoñQ>_|Q> Ho$ g§~§Y _| Cn¶w³V {ZU©` boZm hmoVm h¡Ÿ&
                  investment of funds. Successful operation of
                                                              {H$gr {~OZog H$m g\$bVmnyd©H$ g§MmbZ Bg ~mV na
                  any business depends upon the investment of  {Z^©a H$aVm h¡ {H$ CnbãY g§gmYZm| H$m BÝdoñQ>_|Q> Bg
                  resources in such a way that brings the best
                  possible  returns  from  such  investment.  The  àH$ma hmo {H$ BÝdoñQ>_|Q> go {_bZo dmbm [aQ>Z© loð>V_ hmoŸ&
                  investment  decision  of  a  firm  is  known  as  {H$gr \$_© Ûmam BÝdoñQ>_|Q> Ho$ g§~§Y _| {b`m J`m {ZU©` hr
                  'capital  budgeting'  or  'capital  expenditure'  "H¡${nQ>b ~OqQ>J" `m "H¡${nQ>b EŠgnopÝS>Ma" g§~§Yr
                  decision.                                   {ZU©`Z H$hbmVm h¡Ÿ&

                  Meaning of Capital Budgeting                H¡${nQ>b ~OqQ>J H$m AW©
                      Capital  Budgeting  means  planning  for    H¡${nQ>b ~OqQ>J H$m AW© h¡, H¡${nQ>c AgoQ²>g Ho$
                  capital assets. It is to be decided whether money  {cE `moOZm ~ZmZmŸ& `h {ZU©` boZm {H$ YZ H$mo {H$gr
                  should  be  invested  in  long  term  projects  or  XrK©H$mbrZ àmoOoŠQ> _| bJm`m OmE AWdm Zht; CXmhaU Ho$
                  not, for example, setting up a new factory or
                  installing machinery etc. There may be vari-  {bE, {H$gr ZB© \¡$ŠQ>ar AWdm Z`r _erZ H$s ñWmnZm
                  ous proposals regarding capital expenditure.  Am{XŸ& H¡${nQ>b EŠgnopÝS>Ma Ho$ g§~§Y _| {d{^Þ àñVmdm|
                  We are required to choose the best out of vari-  na {dMma {H$`m Om gH$Vm h¡Ÿ& h_| CZ {d{^Þ {dH$ënm| _|
                  ous  alternatives.                          go gd©loð> H$m M`Z H$aZm hmoVm h¡Ÿ&
                      In any  business, investment of  funds in   {H$gr ^r {~OZog _|, ^y{_, ^dZ, CnH$aU `m ñQ>m°H$
                  land,  building,  equipment  or  stock  must  be  _| BÝdoñQ>_|Q> ~hþV gmdYmZrnyd©H$ H$aZm Mm{hEŸ& EH$ ~ma
                  made carefully. Once the decision to acquire a  {\$ŠñS> AgoQ²>g _| BÝdoñQ>_|Q> H$aZo Ho$ níMmV² Cg {ZU©`
                  fixed asset is taken, it  is very difficult to re-
                                                              H$mo ~XbZm ~hþV H${R>Z hmoVm h¡Ÿ& ßbmÝQ> Ed§ _erZar na
                  verse that decision. Expenditure on plant and
                  machinery and other long term assets influ-  {H$`m J`m ì`` d AÝ` [\$ŠñS> AgoQ²>g _| BÝdoñQ>_|Q>
                  ences the future earning capacity of the firm.  h_mao \$_© H$s ^mdr bm^mO©Z j_Vm H$mo à^m{dV H$aVm h¡Ÿ&

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