- CFA Exams
- 2024 Level I
- Topic 6. Equity Investments
- Learning Module 7. Company Analysis: Forecasting
- Subject 4. Forecasting Capital Investments and Capital Structure
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Subject 4. Forecasting Capital Investments and Capital Structure PDF Download
Forecast for capital expenditures may differentiate between maintenance and growth capital expenditures.
Maintenance capital expenditures are necessary to sustain current business. Forecasts are often based on depreciation and amortization expenses.
Growth capital expenditures are needed to expand the business. Forecasts are tied up to a company's strategy, expansion plans, and revenue growth.
Capital expenditure forecasting is essential for businesses because it helps them estimate long-term investment needs. Forecasts about a company's capital structure consider historical leverage ratios and capital structure, the company's financial strategy, and capital expenditure forecasts.
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