Abstract

To introduce the concepts of capital and operating budgets. To describe the process for developing a capital budget. To introduce the concept of capital rationing. To consider capital budget prioritization, based on returns, risks, and criticality of assets. Outcomes After reading this chapter you will know: The difference between capital and operating budgets; The typical structure of capital budgets; The process for developing capital requirements for particular equipment types and consolidating them across types; The meaning of capital rationing and how it affects budgets; Methods of dealing with capital rationing including prioritization based on financial return, equipment criticality, equipment age, and condition and risk; How to summarize the capital budget and to be aware of factors involved in managing the capital project portfolio.

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