Question

'Investment criteria is one of the factors which affects capital budgeting decision'. Comment.

Answer 1

Capital budgeting decision involves committing to finance on a long-term basis. This decision is very crucial since it affects the earning capacity in the long-run.

The decision to invest in a particular project involves many calculations regarding the amount of investment, the rate of return, cash flow, etc. These calculations are necessary to evaluate the project for their selection.