Capital budgeting:
Capital budgeting is the process of making decisions regarding capital expenditure alternatives.
In this process, business determines whether projects such as building a new plant or investing in a long term venture are worth pursuing or not.
WACC
WACC means weighted average cost of capital. It refers to the cost of capital which is calculated by multiplying the cost of specific sources and the weight or contribution of those sources in the total capital of the company.
Trade Credit:
Trade credit is a kind of business credit which is extended by the seller of goods to the buyer of the goods. It is credit furnished by a firm's suppliers. It is often the largest source of short term credit, especially for small firms.
Importance of Capital budgeting
✔Long term effect on profitability |
✔Helps in investment decision |
✔Huge investments |
✔Wealth Maximization |
✔Decision can be undone. |
✔Risk and Uncertainty |
✔Expenditure Control |
✔National importance |
No comments