Capital Budget
A Capital Budget is a organizational budget for long-term investments.
- Context:
- It can be produced by a Capital Budgeting Process.
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- Example(s):
- Palo Alto's City Capital Budget for 2015.
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- Counter-Example(s):
- See: Payback Period, Investment, Capital (Economics), Accounting Rate of Return, Average Accounting Return, Net Present Value, Profitability Index, Internal Rate of Return, Modified Internal Rate of Return, Equivalent Annual Cost, Real Options Valuation, Return on Investment.
References
2015
- https://www.austintexas.gov/faq/how-does-citys-capital-budget-differ-its-operating-budget
- QUOTE: The City’s Annual Budget has two primary components: the Operating Budget and the Capital Budget. The Capital Budget funds major improvements to City facilities and infrastructure, and is based on the first year of needs in the five-year Capital Improvements Program (CIP) Plan. The Capital Improvements Program (CIP) Plan is an annually revised document that guides the City’s investments in public facilities and infrastructure during a five-year time horizon. The Capital Budget is supported through multiple funding sources, including different types of bonds (debt), grants and cash as well as other smaller sources of funding.
The Operating Budget includes personnel costs and annual facility operating costs. It is funded primarily through local property and sales taxes; revenue transfers between departments; licenses, such as building and development fees; franchise fees for a company’s use of the City’s rights-of-way; charges for services; fines and other smaller sources of revenue such as interest on investments.
City Council holds public hearings on the proposed operating and capital budgets and then approves both budgets in August or September for the following fiscal year, which begins Oct. 1.
- QUOTE: The City’s Annual Budget has two primary components: the Operating Budget and the Capital Budget. The Capital Budget funds major improvements to City facilities and infrastructure, and is based on the first year of needs in the five-year Capital Improvements Program (CIP) Plan. The Capital Improvements Program (CIP) Plan is an annually revised document that guides the City’s investments in public facilities and infrastructure during a five-year time horizon. The Capital Budget is supported through multiple funding sources, including different types of bonds (debt), grants and cash as well as other smaller sources of funding.
- (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/Capital_budgeting Retrieved:2015-11-6.
- Capital budgeting, or investment appraisal, is the planning process used to determine whether an organization's long term investments … allocating resources for major capital, or investment, expenditures.
2016
- (Wikipedia, 2016) ⇒ https://en.wikipedia.org/wiki/Capital_budgeting Retrieved:2016-9-30.
- Capital budgeting, or investment appraisal, is the planning process used to determine whether an organization's long term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure (debt, equity or retained earnings). It is the process of allocating resources for major capital, or investment, expenditures. One of the primary goals of capital budgeting investments is to increase the value of the firm to the shareholders.
Many formal methods are used in capital budgeting, including the techniques such as
- These methods use the incremental cash flows from each potential investment, or project. Techniques based on accounting earnings and accounting rules are sometimes used - though economists consider this to be improper - such as the accounting rate of return, and “return on investment." Simplified and hybrid methods are used as well, such as payback period and discounted payback period.
- Capital budgeting, or investment appraisal, is the planning process used to determine whether an organization's long term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure (debt, equity or retained earnings). It is the process of allocating resources for major capital, or investment, expenditures. One of the primary goals of capital budgeting investments is to increase the value of the firm to the shareholders.