Capital Budgeting - Limitations posted by
What are the limitations of capital budgeting?
Capital budgeting limitations are as follows:-
1) It has long term implementations which can't be used in short term and it is
used as operations of the business. A wrong decision in the early stages can
affect the long-term survival of the company. The operating cost gets increased
when the investment of fixed assets is more than required.
2) Inadequate investment makes it difficult for the company to increase it
budget and the capital.
3) Capital budgeting involves large number of funds so the decision has to be
4) Decisions in capital budgeting are not modifiable as it is hard to locate
the market for capital goods.
5) The estimation can be in respect of cash outflow and the revenues/saving and
costs attached which are with projects.