Drawbacks of capital budgeting

Question

Write down the drawbacks of capital budgeting?

Answer 1

Capital budgeting drawbacks are illustrated below :-
   
i) It has long term executions which cannot be employed in short term and it is employed as operations of the business. An incorrect decision in the early stages can influence the long-term stability of the company. The operating cost gets raised when the investment of fixed assets is more than necessary.

ii) Inadequate investment makes it hard for the company to raise it budget and the capital.

iii) Capital budgeting engages huge number of funds so the decision has to be taken cautiously.

iv) Decisions in capital budgeting are not adjustable as it is difficult to locate the market for capital goods.