Q1. Define capital budgeting. Why is it important?

Answer: Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. The process helps to determine whether capital assets are worth investing in.

According to Milton “Capital budgeting involves the planning of expenditure for assets and return from them which will be realized in the future time period”.

According to I. M. Pandey, “Capital budgeting refers to the process of generating, evaluating, selecting, and following up capital expenditure alternatives.”