Which of the following is NOT true about capital budgeting?
A) It involves identifying projects that will add to a firm's value.
B) It involves investing large amounts of capital.
C) It allows a firm to reverse the decision of large capital investments at any time.
D) It allows a firm's management to analyze potential business opportunities and decide on which ones to undertake.

Question

Quizplus · Accepted Answer

Capital budgeting involves making long-term investment decisions that will impact the firm's future cash flows. Once a large capital investment has been made, it is difficult to reverse the decision without significant costs. Therefore, option C, which states that capital budgeting allows a firm to reverse the decision of large capital investments at any time, is not true.

Which of the Following Is NOT True About Capital Budgeting