Meaning of Capital Budgeting

A Finance Manager has to take various kinds of decisions to serve for the purpose of the Organization. One of the major responsibilities lie on the shoulders of finance managers is, to decide if a particular project should be invested in.
The two terms ‘capital’ and ‘budgeting’ indicate budgeting of capital expenditures. Budgeting stands for careful and well-thought out planning which interpolates returns or benefits expected to accrue to the firm and then comparing them with initial and subsequent outlays of capital. The process enables the management to select the best alternative out of a number of available alternative proposals under consideration.