...Public Budgeting Case Study: Republic of Kosova 9/12/2013 [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.] Contents 1.0. Introduction 3 1.1. Problem Statement 3 1.2. Report Structure 4 2.0. Methodology 4 3.0. Analyses 4 3.1. Overview of Public Budgeting 4 3.2. Public Budgeting in Kosova 5 Executive Summary Based on ‘Public Budgeting’ book, public budgeting is defined as making and implementing decision regarding the acquisition, allocation, and use of resources by government, with a primary focus on money in the modern age. Similar to budgeting of private companies as well as budgeting of families, public budgeting deals with generation of income, and then planning and monitoring how that incomes are being spent. This study aims to explain and understand the budgeting process in the Republic of Kosova by investigating which are the pros and cons in their process. To compile the report, only secondary data have been used such as literature and publications taken on official websites. Public budgeting, involves in itself some other tasks that sometimes could be incompatible and may erode the ability to perform the other task. These tasks includes: setting goals and priorities, linking goals to actions, managing the economy...
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...≪ Public Budgeting and Finance Discussion≫ ≪Course ≫ ≪Name≫ ≪Date ≫ DISCUSSION 1 Government programs impacting government spending Program 1: (Aid to the States The federal government was assigned by the constitution powers leaving most of the government functions to the state. The powers are not delegated to the United States nor prohibited by it to the states are reserved to the states or the people. The policymakers and the courts have in the recent years undertaken most of the activities reserved to local government and the state through the “grant in aids” programs. These are programs subsidies combined with the federal regulatory controls to micromanage state and local activities. The theory behind grant in aids was that federal governments were supposed to operate programs in the interest of the national government. On the contrary, the in practice, the help system works differently. Many of the federal politicians preoccupy themselves with the competitive scramble of maximizing the subsidies for their states without caring if the program is efficient or how limited the budget is. Grant in aid program needs to be eliminated. Federalism should be revived and the grant programs terminated. There is no clear reason as to why the activities should not be funded at the local and states levels) Program 2: (Military expenses-It is good to note that the United States policy makers support highly expensive missions for the military instead of the essential role of defending...
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...Public Budgeting Budgeting is a process that creates a plan to spend money. The spending plan is referenced as a budget. In creating the spending plan it allows an organization to determine in advance if there will be enough monies to carry out tasks. Budgeting is important for many reasons yet; it ensures that funds will always be there for things of need and things that are important. A budget can provide a broader picture on how an organization can use its financial resources. Thus, following a budget or a spending plan can keep an organization out of debt or help an organization to come out of debt. Budgeting can also provide an organization in the involvement process of examining the past financial information. According...
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...Public Budgeting-Revenue Sources Tammy E Bushman, BS, BHT, CRSS ACC/574 Public Budgeting August 24th, 2015 Lana Salomonson Public Budgeting-Revenue Sources Three revenue sources in public budgeting Charges for services: Charges for services are described as consumer charges and additional fees that derive from governmental and business endeavors. Such charges for governmental activities include elements such as licenses, permits, fines, forfeits, and for performing or running distinctive assessments that are frequently charged for services supported outside the typical service area or beyond the bounds of the normal degree of services. Additional governmental service fees that are included in the “Charges for Services” category include matters such as incarceration of prisoners (Wilson, Kattelus, & Reck, 2007). These types of charges also encompass miscellaneous services rendered inside the states. These various charges consist of document fees, court-filling fees, and park entrance fees. It also suggests any government that acquires, uses, or benefits from goods and services provided. A charge for services is a specific type of fee that is charged to compensate for services related to the basic service or product essentially purchased. Services fees are referred to as countless names dependent on the trade or industry. These charges are frequently imposed when human interaction between a company and consumer is involved ("Invostopedia", 2015). Property Tax: ...
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...Part A “Capital budgeting over the years has become a sophisticated process for the finance officer. The different methods available to the finance officer have increased and become more accurate and centred upon the goal of maximizing wealth. However has there been an increase in the usage of these new methods or are decision makers still using the easier methods?” Capital budgeting is a tool management use to make investment decisions. Despite the pitfalls pointed out in Yee-Ching Lilian Chan’s article “Use of capital budgeting techniques and an analytic approach to capital investment decisions in Canadian Municipal Governments”, which includes overemphasis on the quantifiable aspects of capital projects, random cut offs on the timing and the amount of cash flows, Unrealistic discount rates or IRR assumptions. Methods such as profitability index, internal rate of return, breakeven, payback period and net present value are all discounted cash flows which are commonly used in practice. In 2001 Elijelly, A & Abuldris published an article “ A survey of capital budgeting techniques in the public and private sectors of a less developed country, Sudan” They concluded that most public enterprises in less developed countries, do not apply any capital budgeting methods when making investment decisions. The payback method was the most widely used followed by the Internal rate of return in the private and public sectors that did use capital budgeting techniques. “In contrast to the...
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...CAPITAL BUDGETING: ADVANTAGES AND LIMITATIONS. SEPTEMBER 2012 CHAPTER ONE INTRODUCTION 1.0 Background Study Capital budgeting is the process by which firms determine how to invest their capital. Included in this process are the decisions to invest in new projects, reassess the amount of capital already invested in existing projects, allocate and ration capital across divisions, and acquire other firms. In essence, the capital budgeting process defines the set and size of a firm’s real assets, which in turn generate the cash flows that ultimately determine its profitability, value and viability. In principle, a firm’s decision to invest in a new project should be made according to whether the project increases the wealth of the firm’s shareholders. For example, the Net Present Value (NPV) rule specifies an objective process by which firms can assess the value that new capital investments are expected to create. As Graham and Harvey (2001) document this rule has steadily gained in popularity since Dean (1951) formally introduced it, but its widespread use has not eliminated the human element in capital budgeting. Because the estimation of a project’s future cash flows and the rate at which they should be discounted is still a relatively subjective process, the behavioural traits of managers still affect this process. Capital budgeting is a process...
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...Capital Budgeting Introduction A logical prerequisite to the analysis of investment opportunities is the creation of investment opportunities. Unlike the field of investments, where the analyst more or less takes the investment opportunity set as a given, the field of capital budgeting relies on the work of people in the areas of industrial engineering, research and development, and management information systems (among others) for the creation of investment opportunities. As such, it is important to suggest that students keep in mind the importance of creativity in this area, as well as the importance of analytical techniques. Because a project is financially sound, it must be ethically sound, right? Well . . . the question of ethical appropriateness is less frequently discussed in the context of capital budgeting than that of financial appropriateness. Consider the following simple example: The American Association of Colleges and Universities estimates that 10 percent of all college students cheat at some time during their postsecondary education careers. You might pose the ethical question of whether it would be proper for a publishing company to offer a new book How to Cheat: A User's Guide. The company has a cost of capital of 8% and estimates it could sell 10,000 volumes by the end of year one and 5,000 volumes in each of the following two years. The immediate printing costs for the 20,000 volumes would be $20,000. The book would sell for $7.50 per copy and...
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...Capital budgeting Making decisions having significant future benefits or costs for various entities and their stakeholders. Capital budgeting is the backbone of financial economics. Related topics in financial economics include: the time value of money, the meaning of net-present value, accounting concepts consistent with present-value calculations, discount rates, and option valuation techniques. In the public sector, the term is often exclusively associated with infrastructure investments -- plant and equipment. It is more properly associated with all policy choices that have significant, long-term consequences: especially decisions about missions, programs, products, processes, or procedures. There are standard solutions to several kinds of capital-budgeting problems: make or buy decisions, investment in working capital (especially inventories) decisions, maintenance-level decisions, project selection, the choice of mutually exclusive investments, and investments in plant with fluctuating rates of production. However, the same basic calculus of benefits and costs is supposed to guide all classes policy choices with long-term consequences. Financial Theory Financial theory teaches that, in the presence of a capital market where funds can be obtained at a price, welfare will be maximized by the implementation of all policy choices that generate positive net-present values. This means, in part, that the timing of benefits and costs is generally of no...
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...Capital Budgeting Ashford University Government Budgeting PPA603 June 16, 2014 Capital Budgeting The main principle of the capital budget is to channel the total distribution of state expenditures for public services. To present the greatest possible outline of current and planned capital investments and assure state governments’ ability to borrow will not increase nor decrease. This paper will discuss how the debt capacity of state is established and then discuss and assess the effect of repaying or reorganizing current debt commitment. This paper will also discuss different funding substitutes that can be used to support debt commitment. This paper will utilized the City of Toledo, whose capital budget is a 4 year plan, which focuses on roads, modernization and police hiring (City of Toledo, 2014). Capital budgeting is the development process used to regulate which of an organization’s extended term assets are worth following according to Devoy & Wise (1979). City of Toledo has one of the most comprehensive capital budgets, encompassing all new construction, including roads and public safety. The City of Toledo policy and process identifies the fiscal year for the City beginning on the first day of January and requires that on or before the fifteenth day of November of each year, the Mayor must prepare a balanced budget estimate of the expenses of conducting the affairs of the City for the following fiscal year (City of Toledo, 2014). While the capital budget...
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...concepts in strategic planning is firms’ capital investment decisions and it is also a critical component of “financial theory”. The theory is focused on cash flow and return on the investment. The tool used in investment decisions is net present valued (NPV) which was calculated from present valued minus required investment or which was reduced to discounted cash flow formula because the net present value is a matter of cash flow that will gain in the future. [pic] The company is comprised of tangible assets and intangible assets including growth opportunities. The Intangible assets and this growth is a clear reflection of the stock prices and was used to evaluate the capital budgeting analysis will has high NPV. The opportunity cost of each project will vary depending on the risk of the project. The company can divide the project groups with...
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...Bryan Kimmell How do CFOs make capital budgeting and capital structure decisions? Introduction A comprehensive survey is gone that describes the current practice of corporate finance. The survey will give us a betting understanding of where the theory and practice of corporate finance are consistent and areas where they are not. The survey conducted is based on two parts, capital budgeting and capital structure. The survey goes deeper and tries to find out what causes capital budgeting and structure decisions in firms. The survey consists of 100 questions to explore capital budgeting and structure decisions in depth. The original sample for the survey was 4,440 firms but only 392 CFOs responded to the survey, making the response rate a dramatic 9%. The results of the survey were analyzed based on firm characteristics. The responses given by the executives are compared in relation to the firm size, P/E ratio, leverage, credit rating, dividend policy, industry, management ownership, CEO age, CEO tenure, and CEO educational attainment. Comparing the responses to all these variables gives the results a more meaningful explanation because it is able to test various finance theories. The responses to the capital budgeting portion of the survey follow academic advice and use present value techniques to evaluate new projects. But when it comes to capital structure, firms rely on practical, informal rules and pay less attention to academic advice. Survey Methodology Before the...
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...Handouts for Corporate Finance 1 Capital Budgeting Introduction A logical prerequisite to the analysis of investment opportunities is the creation of investment opportunities. Unlike the field of investments, where the analyst more or less takes the investment opportunity set as a given, the field of capital budgeting relies on the work of people in the areas of industrial engineering, research and development, and management information systems (among others) for the creation of investment opportunities. As such, it is important to suggest that students keep in mind the importance of creativity in this area, as well as the importance of analytical techniques. Because a project is financially sound, it must be ethically sound, right? Well . . . the question of ethical appropriateness is less frequently discussed in the context of capital budgeting than that of financial appropriateness. Consider the following simple example: The American Association of Colleges and Universities estimates that 10 percent of all college students cheat at some time during their postsecondary education careers. You might pose the ethical question of whether it would be proper for a publishing company to offer a new book How to Cheat: A User's Guide. The company has a cost of capital of 8% and estimates it could sell 10,000 volumes by the end of year one and 5,000 volumes in each of the following two years. The immediate printing costs for the 20,000 volumes would be $20,000. The...
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...Airlines is worth for £350 million for an estimated ten years of their life. There are majorly two large plane manufacturers Airbus and Boeing, considering the history of safety we decide to pursue Boeing as the supplier of these aircrafts. Since Fantasy Airlines is a public limited company therefore, debt, preferred shares and equity options are available to Fantasy Airlines to finance this fleet purchase. Considering the advantages and disadvantages of all options, we will review our results separately with every option available. Basic investment appraisal techniques that will be used in the analysis will include: • Net Present Value • Accounting Rate of Return • Internal Rate of Return • Payback Period • Profitability Index The following assumptions are necessary for our investment analysis: • Option 1: Cost of capital (in case of debt) = 1.15% • Option 2: Cost of capital (in case of equity) = 1.5% • Option 3: Cost of capital (in case of preferred shares) = 1.25% • Option 4: Weighted average cost of capital (in case of 50% debt, 25% preferred shares and 25% equity) = 1.18% Net Present Value Net present value is capital budgeting technique, which emphasizes that the bottom line net present value should be positive after all obligations are met. Option with highest net present value is the most viable one. The estimated future cash-flows are discounted today with a certain cost of capital to calculate...
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...exclusive projects. It has inspired many research scholars and is primarily concerned with sizable investments in long-term assets, with long term life. The growing internationalization of business brings stiff competition which requires a proper evaluation and weight age on investment appraisal issues viz. differing project life cycle, impact of inflation, analysis and allowance for risk. Therefore financial managers must consider these issues carefully when making capital budgeting decisions. Inflation is one of the important parameters that govern the financial issues on capital budgeting decisions. Managers evaluate the estimated future returns of competing investment alternatives. Some of the alternatives considered may involve more risk than others. For example, one alternative may fairly assure future cash flows, whereas another may have a chance of yielding higher cash flows but may also result in lower returns. It is because, apart from other things, inflation plays a vital role on capital budgeting decisions and is a common fact of life all over the world. Inflation is a common problem faced by every finance manager which complicates the practical investment decision making than others. Most of the managers are concerned about the effects of inflation on the...
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...(3) parts. The purpose of this assignment is to help the students to understand how an organization demonstrates key areas of financial management in practice. The students will also learn to identify the corporate goals that are important to an organization and therefore, be the main objective of financial managers. Besides, students will also be familiarizing with the financial market especially capital market. Students will have a better understanding on importance of efficient market hypothesis to financial management and ability to explain the difference between the various forms of market efficiency. Lastly, students will identify and distinguish the differences between security valuation and capital budgeting together with the importance of capital budgeting to an organization. Project Outline: Part 1 * Each student is required to choose 2 listed companies that operate in different sectors of the economy. The companies should be quoted on either the London Stock Exchange or Bursa Malaysia. * Examine the annual report for the 2 companies, and briefly describe the background of the 2 companies. * Examine the chairman’s statement from the latest annual report. Are the corporate goals clearly specified? What specific references are made to financial management? Part 2...
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