The Role of Capital Budgeting in Strategic Business Planning

Abstract

Capital budgeting is a fundamental financial process that enables companies to evaluate and select investment opportunities that align with long-term strategic goals. This research examines the role of capital budgeting in strategic business planning, exploring how businesses utilize financial analysis tools to make informed decisions about capital expenditures. By analyzing various methods such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period, this study investigates how these techniques guide companies in their pursuit of growth, competitiveness, and sustainability. Furthermore, the paper explores the integration of capital budgeting with overall corporate strategy and the role of risk management, market conditions, and innovation in shaping investment decisions. The findings suggest that a robust capital budgeting process not only ensures efficient allocation of resources but also facilitates the alignment of financial decisions with broader organizational objectives.