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Capital budgeting refers to the process used by companies to evaluate long-term investments, also known as capital expenditures. These investments typically have a lifespan of more than one year and involve significant financial outlays. Capital budgeting decisions are crucial for a company's growth and profitability, as they can impact its cash flows and financial position for years to come. The process involves analyzing potential projects based on their expected future cash inflows and outflows, discounted at an appropriate rate of return. This allows companies to determine whether a project is likely to generate sufficient returns to justify the initial investment. Common techniques used in capital budgeting include net present value (NPV), internal rate of return (IRR), and payback period. Capital budgeting decisions are influenced by various factors, including a company's risk tolerance, financial position, and strategic objectives. Companies must carefully consider these factors when making investment decisions to ensure that they align with their overall business strategy and maximize shareholder value.