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Purchasing
Published in Titus De Silva, Integrating Business Management Processes, 2020
Capital expenditure is used to purchase assets for the operation of the organisation. Organisations allocate an annual budget for capital expenditure. Standard general equipment does not require special design features. Material handling equipment, computer systems and furniture are examples of standard general equipment, although computer systems may be customised for the organisation’s requirements. Specialised production machinery such as bottle fillers, special machine tools and power-generating equipment are specialised capital equipment that requires technical know-how. Capital expenditure items are not purchased regularly, rather as and when required. These items have a long “operational life”, and some may last up to 10 years. The purchase of capital expenditure involves high costs and therefore executive approval is necessary, and it is usually purchased from suppliers who have a long relationship with the purchaser.
Cost Estimation
Published in Mark J. Kaiser, Arno de Klerk, James H. Gary, Glenn E. Hwerk, Petroleum Refining, 2019
Mark J. Kaiser, Arno de Klerk, James H. Gary, Glenn E. Hwerk
Capital spending and operating expenses are primary cost components in all process industries and require estimation in project evaluation and design studies. Capital expenditures arise when constructing process units, performing expansions and environmental compliance, and improving energy utilization and process flows. Operating costs are those costs incurred through the normal operation of plant and equipment needed to provide services. The distinction between the two cost categories arise due to the nature of its duration and accounting treatment. Capital expenditures are for items expected to last longer than one year and are depreciated according to a specified schedule for tax purposes, whereas operating cost occur over a period less than a year and are expensed. Equipment is a capital expense; labor, chemicals, utilities are operating expenses. The purpose of this chapter is to describe the factors that impact capital and operating cost, and the normalization procedures required in cost estimation. A summary of U.S. Gulf Coast process cost curves circa 2018 are presented along with a survey of U.S. refinery operating expenditures.
Economics
Published in W. P. Jones, Air Conditioning Applications and Design, 2012
There is another useful concept, termed internal rate of return. This reflects the fact that the present value of a proposal becomes zero at the end of its chosen life according to the discount rate adopted for the calculation. Such a discount rate is termed the internal rate of return and the present value of a project will be positive at the end of its life, for any discount rate, that is less than the internal rate of return. The cost effectiveness of different proposals can be ranked in the order of their internal rates of return. Projects with a larger internal rate of return will be more cost-effective than those with smaller internal rates of return. This is because the internal rate of return corresponds to the discount rate, at which the capital expenditure is earning money on the original investment.
Techno-economic analysis of production and purification of lipase from Bacillus subtilis (NCIM 2193)
Published in Preparative Biochemistry & Biotechnology, 2023
Hrithik Baradia, S. Muthu Kumar, Soham Chattopadhyay
The equipment cost, utility, land, control and instrumentation, piping, electricity, building, additional facility, construction, contingency, and working capital are all included as capital expenditure and summarized in Table 4. Figure 3 represents the contribution of different factors to the annual operating cost of the plant. From Table 4, it is evident that a fixed capital investment of $2,299,000 is required. A yearly operating cost of $16,021,000 is needed to run the plant and to produce 1690 kg of partially purified lipase. From Figure 3, it is clear that about 90% of operating cost is spent on raw materials. Other cost contributing factors are facility, consumables, and labor required for the regular functioning of the plant.
Smart semiconductor manufacturing for pricing, demand planning, capacity portfolio and cost for sustainable supply chain management
Published in International Journal of Logistics Research and Applications, 2022
Chien-Fu Chien, Hsuan-An Kuo, Yun-Siang Lin
The fundamental goal of capital expenditure is to enhance profitability. There will be planned finical KPIs based on the proposed strategy. Whenever the expected payback time, Return on invested capital and standard gross margin reach the company’s target, decision-makers are likely to conduct the proposed capital expenditure strategy. Therefore, the new fab schedule should be aligned once the decision-maker decides to conduct the capital expenditure proposal due to capacity ramp-up.
R&D investment and financing efficiency in Chinese environmental protection enterprises: perspectives of COVID-19 and supply chain financial regulation
Published in International Journal of Logistics Research and Applications, 2022
Xiaojing Yi, Kun Sheng, Tao Yu, Yuanyue Wang, Shuhong Wang
Short-term loans (sl) are measured by the ratio of current liabilities to total assets. It measures the loans granted by banks and other financial institutions when the capital turnover of enterprises is not sufficient to meet their operational needs and is therefore considered a form of financing. Larger short-term loans improve the financing efficiency of enterprises. Capital intensity (ci) is the ratio of capital expenditure to operating income. Capital expenditure is cash paid for the purchase and construction of fixed assets, intangible assets, and other long-term assets. Due to the capital-intensive nature of EPEs, changes in this indicator can measure their overall development. As capital intensity is related to financing efficiency, it is treated as a control variable, with higher capital intensity indicating greater financing efficiency. Net profit on sales (npos) is the ratio of net profit to sales revenue, which reflects the income from sales revenue and is an important measure of corporate profitability. A larger net profit on sales is conducive to the greater profitability and improved financing efficiency of the enterprise. Inventory turnover rate (scs) is the ratio of cost of sales to average inventory, which reflects inventory liquidity and capital utilisation as a measure of operating capacity and debt repayment ability. Higher inventory turnover rates indicate resilience to risks, which enhances the financing efficiency of enterprises. The liquidity ratio (fr) is the ratio of current assets to current liabilities and measures the short-term debt-paying ability of an enterprise. Higher liquidity ratios suggest a greater ability to repay debt, which is conducive to improving financing efficiency. Cash ratio (cr) is the ratio of cash and its equivalents to current liabilities. When an enterprise has excessive accounts receivable, the cash ratio can measure its liquidity. High cash ratios indicate a stronger debt repaying ability, which is conducive to improving financing efficiency. The descriptive statistics of the variables are presented in Table 2.