Firms typically make a variety of long term

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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 capital expenditure An outlay of funds by the firm that is expected to produce benefits over a period of time greater than 1 year. operating expenditure 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 outlay resulting...
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This document was uploaded on 01/19/2014.

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