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BRILLIANT’S Capital Budgeting 409

The generation of the projects may take àmoOoŠQ>²g H$m àma§^ Q>m°n _¡ZoO_|Q> Ho$ ñVa na `m
place at the levels of top management or at the l{_H$m| Ho$ ñVa na ^r hmo gH$Vm h¡Ÿ& CXmhaU Ho$ {cE,
level of workers also. For example, proposal to
nwamZr _erZ H$mo [aßcog H$aZo `m àmoS>ŠeZ Ho$ VarH$m|
replace an old machine or to improve the
_| gwYma H$m gwPmd l{_H$ Ho$ ñVa na ^r CËnÝZ hmo
production techniques may originate at the
gH$Vm h¡Ÿ&
worker’s level also.
2. Project evaluation: As in case of any 2. àmoOoŠQ> H$m _yë`m§H$Z… {H$gr AÝ` àH$ma Ho$
types of decision making, the capital budgeting {S>{gOZ _oqH$J Ho$ g_mZ hr H¡${nQ>c ~OqQ>J gå~ÝYr
decisions also have two faces. Firstly, estim-
{ZU©` Ho$ ^r Xmo nhcy hmoVo h¢Ÿ& nhcm, H¡$e âcmo Ho$ g§X^© _|
ation of the benefits and costs measured in
_mno JE cm^ d H$m°ñQ²>g H$m {ZYm©aU VWm Xygam, àmoOoŠQ²>g
terms of cash flows and secondly, selection of
an appropriate criterion to judge the desir- H$s Cn`wŠVVm H$s Om±M Ho$ {cE Cn`wŠV AmYma H$m M`ZŸ&
ability of the projects. It is necessary that the `h Amdí`H$ h¡ {H$ àmoOoŠQ> H$m _yë`m§H$Z {Zînj g_yh
evaluation of the projects is done by impartial
VWm g§~§{YV joÌm| Ho$ {deofkm| Ho$ Ûmam {H$`m OmEŸ& àmoOoŠQ²>g
group and experts in the fields. Care must be
H$s Cn`wŠVVm H$s Om±M hoVw AmYma H$m M`Z H$aVo g_`
taken to choose the criterion to judge the
gVH©$ ahZm Mm{hE VWm YZ _| d¥{Õ hoVw `h H§$nZr Ho$ _yc
desirability of the projects and it should be
consistent with the company’s basic objective CÔoí` Ho$ g§JV hmoZm Mm{hEŸ&
to maximize the wealth.
3. Project selection: There is no fixed and 3. àmoOoŠQ> H$m M`Z… {d{^ÝZ CncãY {dH$ënm| _| go
laid down procedure to select the final crite- A§{V_ _mnX§S> Ho$ M`Z H$s H$moB© {ZpíMV VWm {ZYm©[aV
rion among the various available alternatives.
à{H«$`m Zht h¡Ÿ& \$mBZc àmoOoŠQ> H$m M`Z gm_mÝ`V… Q>m°n
Generally, the selection of the final project is
done by the top management though it may be _¡ZoO_|Q> Ûmam {H$`m OmVm h¡ hmcm±{H$, BgH$s Om±M {d{^ÝZ
scrutinized at various levels. In many cases, ñVam| na H$s Om gH$Vr h¡Ÿ& H$B© n[apñW{V`m| _|, Q>m°n
top management may delegate the authority _¡ZoO_|Q> {H$gr {d{eï> àmoOoŠQ> H$mo ñdrH¥$V H$aZo H$m A{YH$ma
to approve certain projects to lower manage- cmoAa _¡ZoO_|Q> H$mo ^r Xo gH$Vm h¡Ÿ&
ment also.
4. Project execution: After the 4. àmoOoŠQ> H$m H$m`m©Ýd`Z… àmoOoŠQ>
selection of the project, the funds Process of Capital Ho$ M`Z Ho$ níMmV² \§$S> EcmoHo$Q> H$a àmoOoŠQ>
are allocated and the execution of Budgeting H$mo {H«$`mpÝdV {H$`m OmVm h¡Ÿ& hmcm§{H$,
the project is carried on. However,
1. Project generation àmoOoŠQ> nyd© {ZYm©[aV ßcmZ Ed§ eoS²>`yc Ho$
there has to be a proper system to 2. Project evaluation
check that the execution of the 3. Project selection AZwgma {H«$`mpÝdV hmo ahm h¡ `h Om±MZo Ho$
project is being made as per the 4. Project execution {cE EH$ Cn`wŠV {gñQ>_ hmoZm Mm{hEŸ&
pre-decided plans and schedules. 