Features of capital budgeting decisions, Financial Management

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Features of Capital Budgeting Decisions

1.       Existence of potentially large anticipated profits.

2.       Involves a comparatively high degree of risk

3.       Existence of a relatively long time period between the initial outlay and the anticipated returns

4.       Usually they are irreversible without incurring loss

5.       They involve large volume of capital

6.       They are strategic investment decisions and involve blocking of funds for long term and inevitably affect the firm's future cost structure

7.       They affect the profitability of a firm

8.       They have a bearing on the competitive position of the firm essentially because of the fact that they relate to fixed assets, which in a sense are the earning assets of the firm

9.       Cash flow and not profit are essential in investment decisions


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