Why is Capital Budgeting Important in Business?

[Suba]

Capital budgeting is a method for assessing the feasibility of a project, especially long-term projects, such as developing a new business/branch, purchasing fixed assets, etc. Some methods frequently used in capital budgeting include NPV, IRR, profitability index, payback period, and so on.

So, essentially, capital budgeting is part of business financial management, which focuses on assessing the feasibility of an investment project. So why is capital budgeting important in business?
1. Assisting in Making Investment Decisions
2. Optimizing Resource Use
3. Avoiding Investment Risk
4. Long-Term Planning

 

[Fidelia]

Capital budgeting determines if a project is worth embarking on by a business in terms of profitability.

 

[Augusta]

Capital budgeting is important because it creates accountability and measurability. Any business that seeks to invest its resources in a project without understanding the risks and returns involved would be held as irresponsible by its owners

 

[eLdavis]

Budgeting capital in business often plays an important role, it helps with resource management and also ensure proper use of capital.

 

[Kera]

With good capital budgeting, long term planning is feasible for the business. And that helps in business growth and development.

 

[Starmix]

It is important to get rid of future descriptions or untoward happenings in one's ventures. It is essential for everyone especially to those having the same in mindsets.