The basic aim of capital budgeting is __________________________.

To maximise the firm's short-run profit potential

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To maximise the firm's long-run profit potential

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To maximise the firm's sales volume

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To maximise the firm's out-put volume

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Solution

The correct option is B To maximise the firm's long-run profit potential
Capital budgeting decisions refers to the financing and investment decision of a company where the managers take decision in rasing the capital for the company through equity and debt which is then invested in the business projects. The basic aim of capital budgeting is to provide efficiency in financing and investment decision in an organisation in order to maximize long run profit potential of an organisation.

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