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Unformatted text preview: General people do not know that management accounting provides a very scientific technique which is very useful to select best investment projects. All people save some money for their rainy days. They are also interested to invest it in different schemes for increasing its principal amount. But due to ignorance of capital budgeting, they invest their money in risky and unprofitable projects and after these they lost all other good opportunity due to shortage of money source. Before clearing the concept of capital budgeting, I take a very simple example. Mr. Sham is working as Engineer in XYZ Company and Earns Rs. 40000 per month and after some time; he saved Rs. 10, 00,000. Now he wants to invest it. Saving and investment is two different things. Saving means save the money in your pocket or saving account at 3.5% annual interest but investment means to provide money to big corporate public and private companies for getting shares , debentures , mutual funds , public deposits and purchasing of machines for production . All these projects can give you high profit but also risk of loss of money also involves in these projects. Capital budgeting helps you to choose best investment project out of different choices with high profit at minimum risk. If you do not know the techniques of Capital budgeting, please consult Chartered Accountant or Financial Management (At least MBA finance...
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- Fall '10
- Interest, net profit