The Ins and Outs of Capital Budgeting

Overview/Description
 Capital budgeting is an essential part of every company's financial management. It involves examining investment assets and deciding whether or not those assets will achieve the company's desired returns over an extended period of time. To effectively manage your company's finances, you must evaluate a number of factors in making investment decisions. This course will explain what a capital budget is and present the different types of assets that your company will inevitably encounter. It lists several factors that influence fixed asset acquisitions. The course illustrates how to evaluate acquisition of fixed assets before you spend any money. The course teaches you the concept of the Time Value of Money and shows you how to use this information as well as Net Present Value, Profitability Index, Internal Rate of Return, and Payback Period to evaluate different investments. The unification of the information and tools presented in this course will assist you in effectively managing your company's finances with confidence.

Target Audience
 Managers, assistant managers, and finance staff with budgeting responsibilities as well as non-financial executives

Expected Duration
3.5

Lesson Objectives:

Asset Management

  • identify the importance of proper asset management.
  • match capital budget components to corresponding examples.
  • identify examples of the rules necessary to balance a capital budget.
  • apply the rules necessary to balance a given company's capital budget.
  • identify the current assets of an organization.
  • match factors that influence a company's decision to acquire a fixed asset to corresponding examples.
  • examine a given business scenario to ascertain on what basis a company should or should not acquire a fixed asset.

    • Return on Investments

  • recognize the importance of using capital budgeting tools to determine return on investments.
  • sequence the calculation steps in an example of a time-value calculation.
  • calculate the time value of given investments.
  • calculate the net present value of a given investment that has even cash flows over its useful life.
  • use the profitability index to determine if a given investment should be accepted based on its return on investment (ROI).
  • utilize the internal rate of return method to determine whether a given investment decision is appropriate.
  • employ the payback period method to evaluate a given investment opportunity.


    • Course Number: FIN0162