Unformatted text preview: in benefits received within 1 year. Fixed-asset outlays are capital
expenditures, but not all capital expenditures are classified as fixed assets. A
$60,000 outlay for a new machine with a usable life of 15 years is a capital
expenditure that would appear as a fixed asset on the firm’s balance sheet. A
$60,000 outlay for advertising that produces benefits over a long period is also a
capital expenditure, but would rarely be shown as a fixed asset.1
Capital expenditures are made for many reasons. The basic motives for capital expenditures are to expand, replace, or renew fixed assets or to obtain some
other, less tangible benefit over a long period. Table 8.1 briefly describes the key
motives for making capital expenditures. Steps in the Process
capital budgeting process
Five distinct but interrelated
steps: proposal generation,
review and analysis, decision
making, implementation, and
follow-up. The capital budgeting process consists of five distinct but interrelated steps.
1. Proposal generation. Proposals are made at all levels within a business organization a...
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This document was uploaded on 01/19/2014.
- Fall '13