Capital Budgeting Strategies

Budgeting is one of the most basic strategies that any number of groups and organizations depend on for financial planning. Families use budgeting to renovate their house, businesses use budgeting to continue providing their services: overall, budgeting is a necessity to insure that sufficient assets are available. Furthermore, budgeting is often used as a measuring tool based on variances between expected and realized expenditures (Atkinson, Kaplan, Matsumura, & Young, 2012). However, the effectiveness of traditional budgeting is widely disputed. Unfortunately, traditional budgeting methods are often unreliable in unstable market conditions, or highly fluid competitive environments. Furthermore, while traditional centralized management can …show more content…
Ideal applications include small businesses and organizations that have relatively few product lines or services, and situations in which market trends are stable. As the size and complexity of the organization increases, so do the budgeting resource requirements. As such, it is also worth noting that due to the complexity of capital budgeting for companies, or a country as large as the United States, advanced computer programs are developed using increasingly advanced algorithms to determine efficient solutions. Specifically, these algorithms focus on determining the most efficient distribution of resources. Ongoing research into genetic algorithms (which aim to mimic biological processes to solve optimization problems) simulates what-if scenarios based on generated cash-flows (Rashidi-Bajgan, Rezaeian, Nehzati, & Ismail, 2010). Unfortunately, simulated results are rarely perfect representations of real circumstances, and can be prone to failure. Regardless, computer programs remain a powerful tool in budget projections and analyses; the challenge of balancing the budget may fall into the hands of computer scientists and programmers, as well as economists and