In order for a company to make sound decisions about whether or not to invest in a new project, it uses a process called Capital Budgeting. This procedure allows the company to assess all of the potential risks and rewards associated with taking on such a large undertaking. Examples of projects that might undergo capital budgeting include constructing a new plant or making a significant investment in another enterprise.The goal of capital budgeting is to ensure that any major investments made by the company are likely to generate positive returns over time. In order to do this, the financial team will examine things like how much money the project is expected to generate as well as how much it will cost. They will also look at things like current market conditions and future prospects for the business sector involved.If everything looks good, then management can give final approval for moving ahead with the project. However, if there are any concerns about its viability, then further analysis may be required before making any decisions. Ultimately, though, it's up to senior management whether or not they want take on any additional risk by investing in a new project.
