Capital Budgeting: Theoretical Foundation and Optimization Perspectives

Khatuna Barbakadze  Natia Kakhniashvili  Nato Kakashvili

Journal number 4 ∘ Khatuna Barbakadze ∘ Natia Kakhniashvili ∘ Nato Kakashvili ∘
Capital Budgeting: Theoretical Foundation and Optimization Perspectives

Expanded Summary

The article discusses the theoretical foundations of budgeting, its main challenges, and the prospects for optimization. In a company, managerial decision-making is impossible without the implementation of an effective system for budgeting financial and economic activities. Budgeting is the process of planning a company\'s financial resources with the aim of optimally allocating revenues and expenses.

The purpose of budgeting is to enable planning and informed managerial decision-making based on an analysis of the company’s financial condition. Through planning, financial risks can be identified, allowing for their reduction. By means of the budgeting process, companies plan and determine their future financial position. Regular budgeting makes it possible to detect existing negative trends, which allows timely corrective actions to be taken. This is especially important in an unstable economic environment, where financial risks and their consequences tend to increase.

The main problem of budgeting is the inaccurate forecasting of revenues and expenses. When revenue projections made by company management are overly optimistic, this often leads to increased expenses, resulting in a budget deficit and a rise in obligations toward partners and employees. The optimization of capital budgeting is linked to several key challenges, such as limited resources, the difficulty of assessing risk and uncertainty, constraints related to capital structure, competition between projects, challenges in monitoring and control, incomplete data, uncertainty about the future, and management strategies that influence the optimal decision-making process.

The analysis of the budgeting process reveals that the efficient management of financial resources plays a crucial role in ensuring a company’s financial stability. Through budgeting, it is possible to plan revenues and expenses, minimize risks, and manage cash flows effectively. However, achieving maximum profitability requires addressing various practical challenges.

Keywords: Budgeting, Financial Stability, Cash Flows, Competitiveness, Forecasting, Optimization.

EKONOMISTI The international scientific and analytical, reviewed, printing and electronic journal of Paata Gugushvili Institute of Economics of Ivane Javakhishvili Tbilisi State University

DOI: 10.52340/EKONOMISTI DOI: 10.36172/EKONOMISTI E ISSN 2346-8432 Print ISSN 1987-6890	Journal number 4 ∘ Khatuna Barbakadze ∘ Natia Kakhniashvili ∘ Nato Kakashvili ∘ Capital Budgeting: Theoretical Foundation and Optimization Perspectives Expanded Summary The article discusses the theoretical foundations of budgeting, its main challenges, and the prospects for optimization. In a company, managerial decision-making is impossible without the implementation of an effective system for budgeting financial and economic activities. Budgeting is the process of planning a company\'s financial resources with the aim of optimally allocating revenues and expenses. The purpose of budgeting is to enable planning and informed managerial decision-making based on an analysis of the company’s financial condition. Through planning, financial risks can be identified, allowing for their reduction. By means of the budgeting process, companies plan and determine their future financial position. Regular budgeting makes it possible to detect existing negative trends, which allows timely corrective actions to be taken. This is especially important in an unstable economic environment, where financial risks and their consequences tend to increase. The main problem of budgeting is the inaccurate forecasting of revenues and expenses. When revenue projections made by company management are overly optimistic, this often leads to increased expenses, resulting in a budget deficit and a rise in obligations toward partners and employees. The optimization of capital budgeting is linked to several key challenges, such as limited resources, the difficulty of assessing risk and uncertainty, constraints related to capital structure, competition between projects, challenges in monitoring and control, incomplete data, uncertainty about the future, and management strategies that influence the optimal decision-making process. The analysis of the budgeting process reveals that the efficient management of financial resources plays a crucial role in ensuring a company’s financial stability. Through budgeting, it is possible to plan revenues and expenses, minimize risks, and manage cash flows effectively. However, achieving maximum profitability requires addressing various practical challenges. Keywords: Budgeting, Financial Stability, Cash Flows, Competitiveness, Forecasting, Optimization.