Capital budgeting means strategic planning

Too often, capital budgeting emphasizes short-term paybacks that cause rejection of good capital investments. The process of capital budgeting is analyzed. The seven steps of the capital budgeting process are: (1) establishing investment objectives, (2) identifying possible investments, (3) analyzing the alternatives, (4) developing the budget, (5) approving investments to be made, (6) implementing the plan, and (7) auditing the post-implementation results of the capital budget. Capital budgeting should be considered in terms of the company's long-term planning and goals, if the budgets are to be effective.