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Unformatted text preview: s goal of maximizing
owner wealth. Firms typically make a variety of long-term investments, but the
most common for the manufacturing firm is in fixed assets, which include property (land), plant, and equipment. These assets, often referred to as earning
assets, generally provide the basis for the firm’s earning power and value.
Because firms treat capital budgeting (investment) and financing decisions
separately, Chapters 8 through 10 concentrate on fixed-asset acquisition without regard to the specific method of financing used. We begin by discussing the
motives for capital expenditure. Motives for Capital Expenditure
An outlay of funds by the firm that
is expected to produce benefits
over a period of time greater than
An outlay of funds by the firm
resulting in benefits received
within 1 year. A capital expenditure is an outlay of funds by the firm that is expected to produce
benefits over a period of time greater than 1 year. An operating expenditure is an
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This document was uploaded on 01/19/2014.
- Fall '13