Hello, please assist me with responding to the below academic discussion question and statements:
Please note whether or not the arguments/statements are articulate and logical & if the facts are correct in 80 – 100 words.
Question:Capital budgeting can be used in the for-profit and not-for-profit
sectors. How could you use capital budgeting in your personal finances?
Statement 1: Jenn- .3 capital budgeting
budgeting is the process for businesses or individuals looking to
invest to determine potential expenses in an investment. If I were
looking at this on a personal financial level, I would compare it to the
same situation as our text and investing in a house that needed
updating. I would look at the cost of the house and then figure how
much would need to be put into it with electricians, plumbers, and
carpenters to figure out how much money would be needed to fix issues. I
would have a projected finish date and a time frame to have the house
sold for a profit. If the houses in the area were selling for a
significantly higher amount than the purchase price and amount it cost
to fix issues then it would be a good investment. You are just taking a
chance hoping that the property sells for a good price in the time
frame needed to make a profit.
For non-profit or government corporations, capital budgeting can be useful. “The
three components—increased revenue, decreased cost, and time—hold true
whether the organization operates as a for-profit or a nonprofit”
(Rothschild, 2012). As long as the non-profit organization or
government is establishing economic value then they are producing what
is needed. Any profit is put back into the organization for further
use. The more profit the better for these circumstances.
Statement 2: Natasha
Capital budgeting can be applied to
my personal finances when it comes time for me to buy a house, knowing the
present value of a house and determining how long it will take me to pay off
the investment and in turn sell it for x number of dollars in y amount of years
is all a part of capital budgeting. It
can become further detailed as to whether or not before selling it would pay
off to renovate a bathroom or kitchen or maybe finish the basement.
The capital budgeting criteria as
mentioned in the textbook is directly applicable to non-profit organizations
and government agencies. Albeit
non-profits and government agencies are not in business to make money for
shareholders they are still a form of business.
If sound investments are not made into what it is they do which is
essentially protecting and providing services and at times free goods to the
public they can end up just like a for profit business, bankrupt and out of
business. Prime example being the city
of Detroit filing for bankruptcy. “Detroit
filed for bankruptcy Thursday, becoming the nation’s largest public sector
bankruptcy. The move could slash pension
benefits to city workers and retirees, and leave bond holders with only pennies
on the dollar” Isidore 2013, para. 1. The
results of a lack of effective capital budgeting have left the city of Detroit
with hour long response times for the local police, street lights shut off, and
the city becoming increasingly dilapidated.