The capital-budgeting process aims to systematically sort good ideas from bad ones.Group of answer choicesTrueFalse

Evaluation of the Statement

1. Understanding Capital-Budgeting Process: The capital-budgeting process is a critical aspect of financial management within an organization. It involves the evaluation of potential long-term investments or projects to ascertain their viability and profitability.

2. Purpose of Capital-Budgeting: One of the primary aims of this process is to identify which investment opportunities are worth pursuing (good ideas) and which are not (bad ideas). This usually involves assessing projected cash flows, the cost of capital, and the associated risks.

3. Sorting Good Ideas from Bad Ones: By using various analytical techniques, such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period, organizations can systematically evaluate and rank potential projects to make informed decisions.

Final Verdict

Given the understanding of the capital-budgeting process, the statement is True. The process indeed aims to systematically sort good ideas from bad ones to ensure optimal allocation of resources.