What is the primary goal of capital budgeting?

The primary goal of capital budgeting is to evaluate long-term investment decisions. This process involves identifying potential investments, assessing their expected returns, and determining their viability over an extended period. Capital budgeting allows businesses to plan and prioritize expenditures on projects that will generate cash flows and profits in the future.

By focusing on long-term investments, organizations can allocate resources to projects that align with their strategic objectives and financial goals, ensuring that capital is invested in the most beneficial opportunities. This assessment often includes analyzing expected cash inflows, costs, and the potential risks associated with various investments, enabling informed decision-making that supports overall business growth and sustainability.