Capital Budgeting

The process (usually annual) of determining which real assets (i.e., plants...not implants) an entity should invest in via purchase, upgrade, or refurbishment. Think land, machinery and buildings needed to advance the organization's strategy. In large orgs, this may start with ideas from the grunts (line managers, plant foremen, division heads) but is ultimately the responsibility of the controller and/or CFO.

Since it is only a budget, the process tends to be inexact, but generally, the projects invested in should be expected to generate a positive net present value (NPV). In theory, the highest return projects should get the first allocations of capital. Isn't that how our tax dollars get spent as well? Oh. Maybe not.