What are the main goals of capital budgeting? | 3 Answers from Research papers (2024)

Weighted average cost of capital

Capital budgeting

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How planning and capital budgeting improve SME performance?5 answersPlanning and capital budgeting play a crucial role in enhancing the performance of Small and Medium Enterprises (SMEs). Research indicates that effective budgeting processes positively impact SME performance. Budgets act as financial blueprints, guiding decision-making, coordination, and evaluation within a business. Moreover, strategic budgeting practices such as planning for cash flows, controlling cash flows, resource allocation, activity coordination, and monitoring financial position significantly influence the financial performance of SMEs. Additionally, the clarity of budget goals and the level of control in the budgeting process have been linked to increased employee motivation and improved firm performance in SMEs. Therefore, by implementing robust planning and capital budgeting practices, SMEs can achieve better financial outcomes and long-term sustainability.What is needs in budgeting?5 answersNeeds in budgeting refer to the essential requirements or standards used in the budget formulation process. These needs, also known as "expenditure norms" or "minimum standards," play a crucial role in budget preparation, especially in determining transfer and grant allocations to align with national priorities. Understanding and accurately assessing these needs are vital for effective financial planning and resource allocation. The concept of needs-based budgeting emphasizes the importance of focusing on true costs rather than historical practices, promoting transparency, participation, and accountability in the public sector budgeting process. By identifying and addressing these needs, organizations can optimize financial management, make informed decisions, and adapt to changing market conditions.What is Budget allocation?4 answersBudget allocation refers to the process of distributing financial resources among various sectors or activities within an organization or government. It involves determining how much money should be assigned to different areas based on their importance and needs. In the context of discrete-event systems optimization, budget allocation plays a crucial role in simulation-based ranking and selection to identify the best system design from a set of alternatives within a limited simulation budget. Additionally, budget allocation is essential in online advertising to optimize spending efficiently, as seen in the Contextual Budgeting System (CBS) framework that uses multi-agent systems and contextual Multi-Armed Bandits for effective allocation. The goal of budget allocation is to ensure that resources are distributed optimally to achieve desired outcomes while considering factors like sector priorities, historical data, and budget constraints.What is the major aim of public expenditure?5 answersThe major aim of public expenditure is to facilitate economic growth, social welfare, and human development. It serves as a strategic tool for governments to provide necessary services to the public, such as security, education, healthcare, and infrastructure. Public expenditure plays a crucial role in enhancing economic activities and ensuring growth, as proposed by Keynesian economics, while also regulating income distribution to achieve economic efficiency and human development. Additionally, public expenditure is utilized to raise aggregate demand, improve income distribution, direct resource allocation, and influence the composition of the national product. Overall, the primary goal of public expenditure is to foster economic development, social welfare, and human well-being through effective allocation and utilization of government funds.How does target costing affect the budgeting process?5 answersTarget costing affects the budgeting process by providing a method to manage costs before they are realized and to achieve target profit at a level of realizable cost without compromising quality. It allows businesses to set cost targets for products based on competitive market prices and then use design-to-cost, value engineering, and other cost reduction techniques to achieve those targets. Target costing also emphasizes the use of activity-based costing to provide better cost information and maximize the effectiveness of cost reduction plans. By integrating target costing with activity-based costing and activity-based budgeting, organizations can determine and estimate target costs more effectively. This approach helps increase the accuracy of managerial decisions and provides more accurate cost information for prediction and decision-making. Target costing also supports the development of valuable and user-oriented properties in project development, particularly in the office building sector.How does a deficit budget affect capital expenditure for the government?5 answersA deficit budget can have a non-linear effect on government capital expenditure. When the public debt to GDP ratio is low, a deficit budget can lead to an increase in government investment as the debt burden can be absorbed by reducing public consumption. However, when the public debt ratio is very high, it becomes difficult to reduce public consumption, resulting in a decrease in government investment. The impact of a deficit budget on capital expenditure depends on the level of public debt and its ability to be absorbed by reducing other areas of government spending. In some cases, high levels of public debt can hinder the government's ability to allocate sufficient funds for stimulating investments, leading to slower economic development. However, in the Canadian context, government capital expenditure has been found to have a positive effect on private sector investment, while government deficit spending does not significantly impact private investment.