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Capital Budget Process & Goal Alignment

Why is the capital budget process so important to an organization? How might a manager align these requests with the needs of their departments as well as the overall success of the organization?

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Why is the capital budget process so important to an organization?

The capital budget process achieves several major goals. First, it allocates capital. That is, it is the process by which competing projects are compared so that the limited capital goes to projects that have the most promise for returns and achieving organization strategic objectives. Second, the capital budget process ensures that any project approved is expected to yield a return better than the cost of capital or minimum required rate of return. Although the firm might ...

Solution Summary

The expert determines why the capital budget process is so important to an organization. How might a manager align these requests with the needs of their department as well as the overall success of the organization is determined. Two paragraphs are in the solution.

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