Capital Budgeting Evaluation Practices of Building Contractors in Hong Kong the Australian Journal of Construction Economics and Building Vol.2 No.1 81 Capital Budgeting Evaluation Practices of Building Contractors in Hong Kong

INTRODUCTION Capital assets are used by the company in the physical process of producing goods and services and are ordinarily used for a number of years. The amounts involved are so large that businesses need to plan and evaluate expenditures for capital assets with care. The plan for expenditures is called a capital budget. The process of determining both how much to spend on a capital assets and which assets to acquire is called capital budgeting. Most firms prepare at least a short-run budget that indicates planned capital outlays for the current and near future periods. Many firms also prepare intermediate and long-term capital budgets that project capital requirements for three to five, and sometimes even ten years ahead. Capital budgets are based on sales forecasts and on the anticipated plant and equipment needed to meet those expected sales (Hunt and Terry, 1993).