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.
Related or Semi-related Video
Finance: What is a Hard Asset?12 Views
Finance allah shmoop What is Ah hard asset Yeah It
takes a lot of hard work to get an asset
like that Okay So hard asset is just one that
you can bang on touch Engage with cell Alright examples
Oil it's Hard asset gold Hard of vintage nineteen Fifty
seven Ferrari with beige leather interior hard four thousand head
of longhorn cattle in texas A commercial building in the
best part of town All of these arm or less
commodities Hard assets Well okay Okay The categories Rare cars
art coins stamps stuff like that that's where they fit
So what do you care if something is ah hard
asset or a soft one Well most or all hard
assets are commodities and they generally do very well in
periods of very high inflation when you know stocks were
getting crushed And yeah the feds raising rates appoint a
quarter now forever Well equities and bonds will get crushed
Commodities well generally keep up with the spike in prices
causing the fed raised rates in the first place So
they're a good hedge for most investment portfolios And not
all of them are great forever like check out riel
Inflation adjusted oil prices the last few decades you had
not a good run Most not all do well though
an oil will likely have its day in the sun
again At some point you lan When in doubt remember
what kim kardashian and warren buffett said A good asset
is hard to find and a hard asset is good
to find But we won't tell you who said which
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