Question

During a recent officer’s meeting of Medium Corporation, Inc., a company that has been in operation for three years, the officers determined that they needed to develop a multi-year plan for financial needs. The officers discussed the new machinery and equipment they would need to handle the growth in operations and replace obsolete equipment, whether they should move the company to a bigger facility or expand the current one, and new products that the company was developing. After lengthy discussion on the matter, they decided that they would expand the current facilities. They assigned the finance officer the task of writing a report translating the plan outlines into hard numbers. What type of report was the finance officer directed to prepare?

Answer 1

The capital budget is the correct answer to this question.

Explanation:

The capital budget varies from the budget period because its elements are of a long-term type. The capital budget is made up of capital expenditures and payments.

Capital budgeting is critical because it provides transparency and quantification. The capital budgeting method is a tangible way for companies to assess the long-term financial and economic feasibility of any development plan. The decision on capital budgeting is both a financial undertaking and an investment.