A capital budget shows a group’s or organization’s planned investments in capital assets (the spent budget then known as CAPEX, Capital expense). Organizations generally acquire capital assets to help generate profit or, if they are a nonprofit, to achieve their mission.
Examples of capital assets include:
- Furniture and fixtures
Capital assets are usually not liquid; that is, they can’t quickly be turned into cash. Organizations liquidate them only as a last resort; for instance, if a business is engaged in bankruptcy proceedings.
Depending on the type of business, capital assets may represent the bulk of a company’s owned assets. Equipment-heavy businesses, such as those involved in oil exploration or construction, are good examples of companies with large investments in capital assets.
Categories: Personal Finance