Accounting 2020 ch 12

Seite 1

Capital budgeting is the process of making capital investment decisions.

Capital investments are made by companies, usually requiring large sums of capital, when they acquire capital assets- assets used for a long period of time.

Four common methods of analyzing potential capital investments:

Payback period

Accounting rate of return (ARR)

Net present value (NPV)

interest rate of return (IRR)