Question

What is your understanding of capital budgets ?

What is your understanding of debt management ?

Answer 1

(Q)  What is your understanding of capital budgets ?

(Ans)  Capital budgeting is made up of two words ‘capital’ and ‘budgeting.’ In this context, capital expenditure is the spending of funds for large expenditures like purchasing fixed assets and equipment, repairs to fixed assets or equipment, research and development, expansion and the like. Budgeting is setting targets for projects to ensure maximum profitability.It is a process of evaluating investments and huge expenses in order to obtain the best returns on investment.The capital budgeting process can involve almost anything including acquiring land or purchasing fixed assets like a new truck or machinery. Corporations are typically required, or at least recommended, to undertake those projects which will increase profitability and thus enhance shareholders' wealth.Capital budgeting is important because it creates accountability and measurability. Any business that seeks to invest its resources in a project, without understanding the risks and returns involved, would be held as irresponsible by its owners or shareholders.

(Q)  What is your understanding of debt management ?

(Ans)  Debt management refers to an unofficial agreement with unsecured creditors for repayment of debts over a specific time period, generally extending the amount of time over which the debt will be paid back. Under debt management, the creditors are offered a Statement of Affairs (SOA). Through this, your disposable income, as estimated by the debt management company, will be proffered to the creditors and they will decide on whether to agree to it or not.Debt management plans help people decrease and eliminate debt.Debt management plans are necessary if you have too much debt. If you cannot meet your monthly payments, your creditors will record it on your credit history, which may lower your credit score, decrease your ability to find a new loan or take out new credit cards, and increase your interest rate.Debt management understands how debt limits your financial choices and how a wide range of strategies can help you control, reduce, and eliminate it.