Question

Differentiate between Capital budgeting and working capital decisions.

Answer 1

Explanation:

The difference between working capital management and capital budgeting is:

Working capital management has a long term focus, while capital budgeting is focused on a short-term timeframe.

Working capital management evaluates projects that add value to a firm, while capital budgeting focuses on expanding current assets of a firm.

Working capital management concentrates on maximizing current assets, while capital budgeting concentrates on minimizing current liabilities.

Working capital focuses on current assets and liabilities, while capital budgeting concentrates on long-term project evaluation.

As both deal with capital, there are no material differences between the functions.