CAPITAL BUDGETING

CAPITAL BUDGETING

Definition:
The process of evaluating and selecting the project is called capital budgeting process of capital budgeting.

Decision Area:

Accept or Reject:
In this area preffer the project that return is more
Example:
A                B                 C
20%           30%             10%
 B will be preffer

Ranking:
In which we select on ranking rate.
Example:
A                   B                   C
-10%            10%               -20%

B will be preffer

Types of Projects

Independent  Project
dependent Project

Independent Project:
The project which cannot compet or depend on each other is called independent project.
Example:

A                                      B                                C
machine                        Frenchise                      Telecom

both of three can be accept or reject because all are differ from each other. In which if company select one other will not be rejected.

Dependent Project:
The project which compete or depend on each other is called depended project.

Example:
A                               B                                  C
sony                           LG                              H.P

suppose all companies have tv and if company buy one company tv then other will also be rejected. so thats why one select and other reject in this project.

Capital Budget Process:

stage 1:
Available project

stage 2:
(cash inflow + cash outflow)=cost return
company will see cost and return on the project.
stage 3:
Evaluate and Select
stage4:
Implementation.



FINANCIAL MANAGEMENT
DECISION AREA OF FINANCIAL MANAGEMENT
AGENCY PROBLEM
TYPES OF BUSINESS
FINANCIAL SYSTEM
FINANCIAL INTERMEDIARIES
TYPES OF FINANCIAL MARKETS
TIME VALUE OF MONEY
EXAMPLES AND FORMULA TIME VALUE OF MONEY
CASH FLOW,SUM,SERIES OF CASH, ANNUITY AND MIX STREAM
ANNUITY TYPES AND FORMULA
AMORTIZATION SCHEDULE OR TABLE WITH EXAMPLE
EFFECTIVE INTEREST RATE WITH EXAMPLE
VALUATION OF LONG TERM SECURITIES (BONDS)
TYPES OF BONDS
BONDS FORMULA,ZERO COUPON PERPETUAL
VALUATION OF LONG TERM SECURITIES (SHARE)
CASH AND MARKETABLE SECURITIES MANAGEMENT
MANAGING CASH INFLOW AND OUTFLOW
SECURITIES MANAGEMENT
SHORT TERM FINANCING
SPONTANEOUS LABILITIES
NEGOTIATED FINANCE
CAPITAL BUDGETING
CAPITAL BUDGETING TECHNIQUE
NET PRESENT VALUE TECHNIQUE
INTERNAL RATE OF RETURN TECHNIQUE
ACCOUNT RECEIVABLE MANAGEMENT
INVENTORY MANAGEMENT
FORCASTING

MBA NOTES FINANCIAL MANAGEMENT