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What are the limitations of capital budgeting?

Open uri20170510 32134 7ezpi6?1494421819 jaggu asked over 2 years ago

Hi I am preparing for CA exam. May I know, What are the limitations of capital budgeting?

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered over 2 years ago

Inadequate investment makes it difficult for the company to increase it budget and the capital. Capital budgeting involves large number of funds so the decision has to be taken carefully. Decisions in capital budgeting are not modifiable as it is hard to locate the market for capital goods.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 jitendra etikala answered over 2 years ago

> Capital budgeting limitations 1) It has long term implementations which can't be used in short term and it is used as operations of the business. A wrong decision in the early stages can affect the long-term survival of the company. The operating cost gets increased when the investment of fixed assets is more than required. 2) Inadequate investment makes it difficult for the company to increase it budget and the capital. 3) Capital budgeting involves large number of funds so the decision has to be taken carefully. 4) Decisions in capital budgeting are not modifiable as it is hard to locate the market for capital goods. 5) The estimation can be in respect of cash outflow and the revenues/saving and costs attached which are with projects.

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