TAILIEUCHUNG - Lecture Managerial accounting (15/e): Chapter 13 - Garrison, Noreen, Brewer

Chapter 13 - Capital budgeting decisions. The term capital budgeting is used to describe how managers plan significant cash outlays on projects that have long-term implications, such as the purchase of new equipment and the introduction of new products. This chapter describes several tools that can be used by managers to help make these types of investment decisions. | Capital Budgeting Decisions Chapter 13 Typical Capital Budgeting Decisions Plant expansion Equipment selection Lease or buy Cost reduction Cash Flows versus Operating Income These methods focus on analyzing the cash flows associated with capital investment projects: The simple rate of return method focuses on incremental net operating income. Typical Cash Outflows Repairs and maintenance Incremental operating costs Initial investment Working capital Typical Cash Inflows Reduction of costs Salvage value Incremental revenues Release of working capital Time Value of Money A dollar today is worth more than a dollar a year from now. Therefore, projects that promise earlier returns are preferable to those that promise later returns. Time Value of Money The capital budgeting techniques that best recognize the time value of money are those that involve discounted cash flows. The payback method focuses on the payback period, which is the length of time that it takes for a project to recoup its

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• Managerial accounting
• Lecture Managerial accounting
• Financial statement
• Capital budgeting decisions
• Cash flows
• Operating income
• Managerial accounting for managers
• Profitability analysis
• Decision making
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• Nonmanufacturing costs
• Classifications of costs
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• Managerial accounting information
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• Cost concepts
• Managerial accounting basics
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• Relevant costing
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