Capitol Budgeting Long Term Financing Assignment - 4

Capitol Budgeting Long Term Financing - Assignment Example Consequently, the operating budget will be capital dependent on the long-term goals of a firm. Capital budget decisions are made independent of operating decisions. Consequently, managements make long-term capital commitments without understanding the repercussions for daily operations. In addition, they are not flexible thought out the year from draft day to end of the financial year. In case an emergency arises at a certain point, it impose capital strains on the operating budget and the effectiveness of a company declines, as the management tends to cut the budget to respond to the emergency at hand (Mary Alexander, Infusion Nurses Society, Ann Corrigan & Judy Hankins, 2010, p. 137). Operating budgets in some firms operate on fixed asset depending on the season of sales. They mostly entail heavy inputs that later give a considerable profited output. With capital budgets in sight and the knowledge that cash is limited, companies tend to pull out on some projects that have low yields and the amounts set for operations reduces accordingly. In conclusion, Capital budget is not solely responsible to affect operating budget, but plays a major role in determining the operations of a