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BRILLIANT’S Capital Budgeting 405

Importance of Capital Budgeting De- H¡${nQ>b ~OqQ>J {ZU©` H$m _hËd
cisions
Capital Budgeting Decisions are of great H¡${nQ>b ~OqQ>J {ZU©`m| H$m {H$gr ì`dgm` Ho$ {bE
importance for a concern. They affect the value AË`{YH$ _hËd h¡Ÿ& `o \$_© H$s d¡ë`y H$mo à^m{dV H$aVo h¢Ÿ&
of the firm. If investment is profitable, the firm's `{X BÝdoñQ>_|Q> bm^Xm`H$ h¡ Vmo \$_© H$s d¡ë`y ~‹T>oJrŸ&
value will increase. Capital investment deci-
sions involve large sum of money to be in- H¡${nQ>b ~OqQ>J {ZU©` _| H¡${nQ>c H$m BÝdoñQ>_|Q> bm±J Q>_©
vested for a long period. They are among the Ho$ {bE {H$`m OmVm h¡Ÿ& Bg H$maU `h EH$ H${R>Z {ZU©`
most difficult decisions to be made. _mZm OmVm h¡Ÿ&
Following are the importance of capital H¡${nQ>b ~OqQ>J {ZU©` H$m _hËd {ZåZ{b{IV h¡…
budgeting decision:
1. Growth: The firm's decision to invest 1. {dH$mg… {H$gr àmoOoŠQ> _| BÝdoñQ> H$aZo H$m {ZU©`
money has a decisive influence on the direc- CgHo$ {dH$mg H$s {Xem V` H$aVm h¡Ÿ& EH$ JbV {ZU©`
tion of its growth. A wrong decision can prove
fatal for the survival of the firm. An unprofit- \$_© Ho$ {b`o KmVH$ {gÕ hmo gH$Vm h¡Ÿ& `{X {H$gr Eogr
able expansion of assets will result in heavy gån{Îm _| {Zdoe H$a {X`m OmE Omo bm^Xm`H$ Zht h¡ Vmo
operation cost to the firm. \$_© H$s g§MmbZ bmJV| ~‹T> gH$Vr h¢Ÿ&
2. Large amount: Investment decisions 2. A{YH$ YZam{e… H¡${nQ>b ~OqQ>J _| BÝdoñQ> H$s
generally involve large amount of funds which OmZo dmbr am{e ~hþV A{YH$ hmoVr h¡Ÿ& Bg H$maU `h ~hþV
make it imperative for the firm to plan its in- Amdí`H$ hmo OmVm h¡ {H$ \$_© AnZr BÝdoñQ>_|Q> g§~§Yr
vestment programmes very carefully and make
advance arrangement for procuring finances `moOZmE± gmoM-g_P H$a ~ZmE Am¡a CgHo$ {bE Amdí`H$
internally or externally. YZ H$m à~ÝY A{J«_ aIo&
3. Irreversibility: Most investment deci- 3. An[adV©Zr¶… BÝdoñQ>_|Q> g§~§Yr A{YH$m§e {ZU©`
sions are irreversible. It is difficult to find a An[adV©Zr¶ hmoVo h¢& Eogr ny§OrJV dñVwE§ {OÝh| àmßV H$a
market of such capital items once they have
been acquired. The firm will incur heavy losses {b¶m J¶m h¡ CZH$mo ~oMZm ‘wpíH$b hmoVm h¡& Eogo AgoQ²>g
if such assets are scrapped. ì¶W© hmoZo na ’$‘© H$mo ^mar ZwH$gmZ hmoJm&
4. Complexity: Investment decisions are 4. O{Q>bVm… BÝdoñQ>_|Q> g§~§Yr {ZU©` gm_mÝ`V…
among the firm's most difficult decisions. They ~ohX O{Q>b hmoVo h¢Ÿ& Bg_| ^{dî` Ho$ g§~§Y _| AZw_mZ
involve an assessment of future bJm`m OmVm h¡ VWm ^{dî` H$m nydm©Zw_mZ
events which are difficult to pre- Importance of bJmZm EH$ H${R>Z H$m`© h¡Ÿ& {H$gr BÝdoñQ>_|Q>
dict. It is really a complex prob- Capital Budgeting go àmßV hmoZo dmbo g§^m{dV bm^m| H$m AZw_mZ
lem to correctly estimate future Decisions bJmZm Am¡a ^r H${R>Z h¡Ÿ& g§^m{dV bm^m|
cash flows of an investment. The
1. Growth _| A{ZpíMVVm Am{W©H$, amOZ¡{VH$,
cash flow uncertainty is caused
2. Large amount
by economic, political, social and gm_m{OH$ Ed§ VH$ZrH$s A{ZpíMVVm Ho$
3. Irreversibility
technological forces. H$maU hmo gH$Vo h¢Ÿ&
4. Complexity
5. Risk: Long-term commit- 5. Risk 5. [añH$… b§~r Ad{Y Ho$ {bE \§$S>
ment of funds may also change 6. Long-term implica- H$m BÝdoñQ>_|Q> H$aZo go \$_© H$s [añH$ ^r
the risk complexion of the firm. If tions ~‹T> OmVr h¡Ÿ& `{X {H$gr àmoOoŠQ> _|