In the Context of Financial Budgets, the Capital Expenditure Budget

question 34

Multiple Choice

In the context of financial budgets, the capital expenditure budget:

• A) provides quarterly estimates of the number of units of each product a firm expects to sell.
• B) identifies a firm's planned investments in major fixed assets and long-term projects.
• C) identifies short-term fluctuations in cash flows that display cash deficits and surpluses.
• D) contains the budgets for direct labor, direct materials, and overhead costs.

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Definitions:

Net Present Value

A valuation method that calculates the present value of expected future cash flows minus the initial investment cost.

Capital Investment Project

A project requiring significant amounts of capital for the purchase, improvement, or maintenance of long-term assets to generate future benefits.

Cash Flows

The sum total of currency transactions inbound and outbound in a firm, markedly affecting its cash-on-hand.

Present Values

The today's value of a sum of money or cash flows expected in the future, calculated using a designated return rate.