Capital Budgeting It is a process of evaluating an investment project and deciding whwther to accept the project or not.

Project: It is a set of non-routine activities with i) specific objectives, ii) specific time period to complete iii) specific budget. Project activities are interrelated and interdependent on one another. Cash flow InflowSales revenue Debt Capital Equity Capital Any kind of earnings

OutflowAny Kind of expenditure Any kind of investment

Net Cash flow = Cash inflow cash outflow In an Income statement

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Gross Profit Earning Before Tax & Interests Earning Before Tax Net Income

There are some non-cash expenses such as Depriciation Expense. Non-cash expenses are the expenses that are recorded in income statement as expenditure but against which there is no actual cash outflow from the business, rather the amount is retained in business in a different name. Reserve Fund: It is a fund which is kept to cover uncertain events. So, Net Cash flow = Net Profit After Tax + Non-profitable expenses