QAEconomics › Capital budgeting is primarily concerned with

Capital budgeting is primarily concerned with

A. capital formation in the economy.

B. planning future financing needs.

C. evaluating investment alternatives.

D. minimizing the cost of capital.


Answer: C. Evaluating investment alternatives.

Capital budgeting refers to the process undertaken by a business venture or company in order to assess the profit making potential of alternative investment ventures.

It is a way for companies to measure, keep track of, and commit to only investments that yield the highest returns. Before any new venture, branch, investment, etc. is approved by the administration of any organization, it must have fulfilled the tenets of capital budgeting before it is approved. This is important because it creates room for measurability and accountability. It also helps the company avoid making unprofitable business investments.

3 years ago