Capital Budgeting Quiz

What is Capital Budgeting?

• Short-term investment evaluation

• Medium-term investment evaluation

• Long-term investment evaluation

• None of the above

What is a Capital Expenditure?

• An outlay of funds that produces immediate benefits

• An outlay of funds that produces benefits for one year

• An outlay of funds that produces benefits over several years

• None of the above

Which step in the Capital Budgeting Process involves managers making proposals for new investment projects?

• Review and Analysis

• Decision Making

• Proposal Generation

• Implementation

What is the purpose of the Review and Analysis step in the Capital Budgeting Process?

• To implement projects

• To monitor results

• To assess the merits of investment proposals

• To make decisions

Who typically authorizes expenditures beyond a certain amount in the Decision Making step?

• Mid-level managers

• Board of Directors

• Junior employees

• All of the above

What is done during the Implementation step of the Capital Budgeting Process?

• Proposals are reviewed

• Investments are monitored

• Projects are implemented

• Decisions are made

What happens in the Follow-up step of the Capital Budgeting Process?

• Managers compare actual costs and benefits to projections

• Projects are approved

• Investments are proposed

• Decisions are reviewed

Which of the following defines Independent Projects?

• Projects whose cash flows are related

• Projects whose cash flows are unrelated

• Projects that compete with one another

• None of the above

What are Mutually Exclusive Projects?

• Projects that have unrelated cash flows

• Projects that do not compete with each other

• Projects that compete with one another

• None of the above

What does the term Capital Rationing refer to?

• Having unlimited funds for investment opportunities

• Having a fixed investment budget with many projects competing for funds

• Accepting all investment opportunities

• None of the above