Describe the capital budgeting process used in the organization you work for today. Provide a general indication of who is involved in the process; how the process flows; what assets are most often involved; and what decision methods (NPV, Payback; IRR, etc) are used. The public sector (government) handles capital budgeting in a different fashion so if you work for a government agency please compare your agency's approach to capital budgeting with the corporate model. Y© BrainMass Inc. brainmass.com October 10, 2019, 8:20 am ad1c9bdddf
In this case we will analyze how a golf course uses the process of capital budgeting for purposes of forecasting and determining their strategic direction. But first, let's understand what capital budgeting is designed to achieve --- it is designed to insure that the necessary long term assets are in place so that goals and targets can be achieved on a long term basis. Assets are acquired for three reasons:
first: they are used to create and sustain revenue (sales);
second: they are used to control and/or reduce expenses;
and third: they are used as a combination revenue generator and expense control mechanism.
The idea is that, if assets do not perform any of these functions, then they simply are not needed and should not be acquired.
In the case of the golf course, several key personnel are involved:
first: both of the owners are involved heavily (they are brothers and have other similar holdings in other states including Florida and Georgia);
second: the General Manager is involved;
third: department heads are involved including maintenance, the director of food and beverage, the marketing director, and the director of promotions and tournaments (including membership).
The process flows essentially from top down. The owners have stated their primary goal is to increase revenue through adding more members and member services, through an increase in green fees, and through increases in tournaments and promotions, such as use of meeting hall, events such as dinners, corporate outings, weddings, and the like.
Primarily, however, they have identified increases in green fees, use of the facilities (restaurant), and membership increases as ...
A discussion of the capital budgeting process at a golf course location