Response on  Capital Expenditure

Response on  Capital Expenditure

Hello Amber, I appreciate the good work you have done on  Capital Expenditure. I agree with your argument that cash flow analysis is an essential component of capital expenditure budgeting as it shows changes in cash amounts (Hayes, 2017). Therefore, the need to pay critical attention to flow assessments will help explain the deviations between the income statement and the balance sheet. I think it is very hard to assess organizational performance without properly analyzing the cash flows (Shim & Siegel, 2012).

Your post on effects of cash flows to the human resource department was very thoughtfully. I agree the human resource department uses the cash flow analysis to know when to train the workers. However, you could have mentioned the impact cash flow analysis on the functionality of other departments. For instance, the production department uses the cash flow analysis information in determining which quality material to order, amount to produce and whether to add overtime hours on the normal hours allocated (Klychova, 2014). I agree with your reasoning on the importance of comprehending components of the capital budget policy as they help the department understand what is significant for them.

Reference

Hayes, C. A. (2017, November 17). Capital expenditure (CAPEX). Retrieved from, https://www.investopedia.com/terms/c/capitalexpenditure.asp

Shim, J. K., & Siegel, J. G. (2012). Budgeting basics and beyond (4th ed.). Hoboken, NJ: John Wiley & Sons.

Klychova, G. S., Faskhutdinova, М. S., & Sadrieva, E. R. (2014). Budget efficiency for cost control purposes in management accounting system. Mediterranean journal of social sciences, 5(24), 79.

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