CFA Level I · CFA Level I Exam · Capital Investments and Capital Allocation
In the capital budgeting process, the step that most likely follows the generation of investment ideas and the forecasting of project cash flows is:
After ideas are generated and cash flows forecast, the next step is evaluating the projects and selecting those expected to add value, forming the capital budget. Monitoring actual results and the post-audit come later, once projects have been approved and implemented.
- Aevaluating projects and selecting those that add valueCorrect
- Bconducting the post-audit of project results
- Cmonitoring actual cash flows against forecasts
Explanation
The usual sequence is idea generation, analyzing proposals and forecasting cash flows, then planning the capital budget by evaluating and selecting value-adding projects. Monitoring and the post-audit occur after projects are approved and underway.
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