Capital budget Deciding whether it's time to buy a new car can certainly be influenced by the amount of money that will be tied up for the next few years. For the average person, it could be a very precarious decision, especially given the volatility of the economy. There are many factors to consider when making major purchases such as time, money, resale value, and general need. Whether it's a personal budget or a budget for a multi-million dollar company, trying to predict what will happen in the future will always have its risks. However, it is an important aspect of a company's survival and overall success in the future. As stated in Corporate Finance by Ehrhardt and Brigham, capital involves long-term resources that are used in production, and a budget is a plan that outlines anticipated expenses. during a later period (p 381). Therefore, when the two words are combined to imply a single definition, the term capital budget is a synopsis of planned investments of assets that will remain for more than one year. Furthermore, capital budgeting is the overall process of analyzing projects and determining which ones to recognize and then incorporate into the capital budget (Ehrhardt & Brigham, 2011, p. 381). The practice of capital budgeting includes forecasting and identifying cash flows, performing scenario and sensitivity analyses, and applying capital budgeting tools (Kwok & Rabe, 2010). This process is essentially where the financial potential for a possible investment or multiple investments is evaluated. In the event that several potential investment opportunities exist, each investment must be analyzed and compared with the other possibilities to understand which opportunity is more attractive or less attractive. Works Cited Ehrhardt, M., & Brigham, E. (2011). The cost of capital. Corporate finance (p. 342-343). Mason, OH: Cengage Learning.Keshav, A. (2009). Necessity and importance of capital budgeting. . Retrieved May 13, 2014, from http://accountlearning.blogspot.com/2011/07/need-and-importance-of-capital.htmlKwok, J. S., & Rabe, E. C. (2010). Conflict between doing well and doing good? Capital Budgeting Case Study - Coors. Journal of Business Case Studies, 6(6), 123-130. Retrieved from http://search.proquest.com.proxy.davenport.edu/docview/818384065?accountid=40195Paden, R. (2014). Components of a capital budget. Houston Chronicle. Sullivan, Arthur and Sheffrin, Steven (2005). Economy: principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. P. 375. The 10 biggest technological failures of the last decade. (2009, May 14). TIME.