Indirect Costs
Indirect costs are those costs that are incurred in the factory but that cannot be directly associate with manufacture. Again these costs are classified according…
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The Classification of Period Costs
The scheme shows five sub classifications for Period Costs. When we look at different organisations, we find that they have period costs that might have…
Nature of capital expenditure
Businesses often face the need to spend large amounts of money on assets that will be functional for many years. Here are a few examples:…
Needs for Capital Expenditure
Investment in fixed assets is generally undertaken because of the need to produce and sell goods or services in the future. It is a commitment…
Capital expenditure
Capital expenditure is an expenditure on long-lived assets, also referred to as fixed assets or non-current physical assets. The term capital investment is sometimes used…
The Influence of Capital Expenditure
Capital expenditure generally brings in changes in the cost pattern of a product or service. If the capital expenditure is to replace an asset with…
CASH FLOWS
Cash receipts and cash disbursements are referred to as cash flows. The cash receipts are cash inflows and the cash disbursements are cash outflows. Capital…
Selection of a Project
A series of activities takes place before a fixed asset is acquired and brought to a state ready for use. For example, one might think…
DISCOUNTED CASH FLOW
The total cash inflows over the life of the project should exceed all of the cash outflows. The cash flows take place over a specific…
Capital Budgeting Models
There are a number of capital budgeting models available that assess and rank capital expenditure proposals. Let’s take a look at four of the most…