# budgeting

Budgeting is the process of utilizing the cash which you are bringing in and to plan for both short and long term. Budgeting proves useful for success of any enterprise or business activity. Budgeting is of advantage for the public to make their decision consciously keeping in view their income and expenses.

## Profitability Index (PI)

Profitability index is a ratio that identify and compares the relationship between the total costs involved in the project and the profit returned from that project. The ratio of profitability index can be shown in the form of formula as under:- Profitability Index Formula

## Simple Rate of Return Method

Simple Rate of Return Method: Learning Objectives: Compute the simple rate of return for an investment project. Definition and Explanation: The simple rate of return method is another capital budgeting technique that does not involve discounted cash flows. The method is also known as

## Screening Decisions and Preference Decisions

Screening Decisions and Preference Decisions: Learning Objectives: Define, explain and give examples of screening and preference decisions. Capital budgeting decisions fall into two broad categories: Screening decisions. Preference decisions. Screening Decisions – Definition and Explanation: Screening decisions relate to whether a proposed project meets

## Income Tax and Capital Budgeting Decisions

Income Tax and Capital Budgeting Decisions: Learning Objectives: Include income taxes in a capital budgeting analysis. In our discussion of capital budgeting decisions in this chapter, we ignored income taxes for two reasons. First, many organizations do not pay income taxes. Not-for-profit organizations, such

## Budgeting and Planning

After studying Budgeting and Planning article you should be able to: Understand why organizations budget and the processes they use to create budgets. Prepare a sales budget, including a schedule of expected cash receipts. Prepare a production budget. Prepare a direct materials budget, including

## Future Value and Present Value Tables

Future Value and Present Value Tables Future Value Tables: Table 1: Future Value of \$1 Table 2: Future Value of Ordinary Annuity  (Annuity in Arrear – End of Period Payments) Present Value Tables: Table 3: Present Value of \$1 Table 4: Present Value of

## Present Value and Future Value – Explanation of the Concept

Present Value and Future Value – Explanation of the Concept: Learning Objectives: Understand present value concepts and the use of present value tables. Compute the present value of a single sum and a series of cash flows. A dollar received now is more valuable

## Review Problem 2: Comparison of Capital Budgeting Methods

Review Problem 2: Comparison of Capital Budgeting Methods Lamer company is studying a project that would have an eight-year life and require a \$2,400,000 investment in equipment. At the end of eight years, the project would terminate and equipment would have no salvage value.

## Cash Budget | Cash Budgeting

Cash Budget | Cash Budgeting: Learning Objectives: Define and explain a cash budget. What is the purpose of a cash budget How to prepare a cash budget. Definition and Explanation: Cash budget is a detailed plan showing how cash resources will be acquired and

## Review Problem 1: Basic Present Value

Review Problem 1: Basic Present Value Computations: For each of the following situations is independent. Workout your own solution to each situation, and then check it against the solution: Situation 1: John has reached age 58. In 12 years, he plans to retire. Upon

## Capital Budgeting Definition

Capital Budgeting Definition: The process of planning significant outlays on projects that have long-term implications such as the purchase of new equipment or the introduction of a new product.

## Capital Budgeting Decisions

Learning Objectives: Evaluate the acceptability of an investment project using the net present value method. Evaluate the acceptability of an investment project using the internal rate of return method. Evaluate an investment project that has uncertain cash flows. Rank investment projects in order of