capital investment project can be distinguished from current expenditures

A capital investment project can be distinguished from current expenditures by two features:

a) such projects are relatively large
b) a significant period of time (more than one year) elapses between the investment outlay and the receipt of the benefits..

As a result, most medium-sized and large organisations have developed special procedures and methods for dealing with these decisions. A systematic approach to capital budgeting implies:

a) the formulation of long-term goals b) the creative search for and identification of new investment opportunities c) classification of projects and recognition of economically and/or statistically dependent proposals d) the estimation and forecasting of current and future cash flows e) a suitable administrative framework capable of transferring the required information to the decision level f) the controlling of expenditures and careful monitoring of crucial aspects of project execution g) a set of decision rules which can differentiate acceptable from unacceptable alternatives is required.