The Asset Acquisition Procedure ensures capital used for purchasing fixed assets meets established financial guidelines for acquiring these assets as evaluated using financial analysis tools. This procedure applies to the Finance Department and other affected departments. (12 pages, 1934 words)
Asset Acquisition Responsibilities:
The CFO (Chief Financial Officer) is responsible for overseeing the asset acquisition process and reviewing the ROI Worksheet with the Capital Budget Committee.
Department Managers are responsible for completing and submitting asset acquisitions for approval.
The Capital Budget Committee should review and approve or disapprove each RC1060-2 ASSET ACQUISITION REQUEST/WORKSHEET based on:
Asset Acquisition Deinitions:
Return on Investment (ROI) – The return ratio that compares the net benefits of a project verses its total costs.
Net Present Value (NPV) – Used to analyze the profitability of an investment or project. The present value of an investment’s future net cash flows minus the initial investment.
Payback Period (PP) – The amount of time taken to break even on an investment. Since this method ignores the time value of money and cash flows after the payback period, it can provide only a partial picture of whether the investment is worthwhile.
Weighted Average Cost of Capital (WACC) – Overall return that a corporation must earn on its existing assets and business operations in order to increase or maintain its current value.
Capital Budget – Long-term and yearly expenditure plan for acquisition of capital assets, construction, or improvement of fixed assets such as land and buildings.