Capital Market Question:
What are the limitations of capital budgeting?
Answer:
Capital budgeting limitations are as follows:-
1) It has long term implementations which can't be used in short term and it is used as operations of the business. A wrong decision in the early stages can affect the long-term survival of the company. The operating cost gets increased when the investment of fixed assets is more than required.
2) Inadequate investment makes it difficult for the company to increase it budget and the capital.
3) Capital budgeting involves large number of funds so the decision has to be taken carefully.
4) Decisions in capital budgeting are not modifiable as it is hard to locate the market for capital goods.
5) The estimation can be in respect of cash outflow and the revenues/saving and costs attached which are with projects.
1) It has long term implementations which can't be used in short term and it is used as operations of the business. A wrong decision in the early stages can affect the long-term survival of the company. The operating cost gets increased when the investment of fixed assets is more than required.
2) Inadequate investment makes it difficult for the company to increase it budget and the capital.
3) Capital budgeting involves large number of funds so the decision has to be taken carefully.
4) Decisions in capital budgeting are not modifiable as it is hard to locate the market for capital goods.
5) The estimation can be in respect of cash outflow and the revenues/saving and costs attached which are with projects.
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