Distinguish between the following: Long-term capital budget and short-term capital budget.

Difference between Long-term capital budget and short-term capital budget Under Long-term Capital budget, the period covered under the planning is three to five or more years. The planning for such expenditure assumes a composite form involving all aspects of economic forecasts for the outlook of entire industry in which the company performs with its unit and forecast for the company with probable or expected coverage of market share. On the basis of this forecast, plant managers estimate their prospective capital expenditure, the marketing managers plan their marketing strategies, the personnel managers assess the requirements for manpower and technical hands to achieve targeted production results, and the finance mangers plans for the funds to be made available for investment taking into consideration the above requirements. The long-range capital budget is continually revised with changing economic conditions, the marketing environment, structure of wages and the inflationary pressures in the economy. It is flexible in nature and oriented towards a long-range growth planning for the company. Short-period Capital budgeting, involves short-range planning for funds and planning of expenditure for a short duration. It does not involve large capital expenditure but covers temporary need for funds for different departments within the company depending upon the degree of urgency, profitability and savings to be achieved with reference to the capital costs to be incurred. Short-term capital expenditure plan is known as operating budget and is concerned with revenues and expenses related to firms daily operations. Significance of planning for capital expenditure is derived only with major investment proposals and the use of funds over a long period. The most important factor affecting the planning horizon is the rate of change in technology in the industry. The advancement in technology may warrant capital investment for short as well as long period depending upon the changing pace of technology and technological obsolescence: long-term plan, however, it helps the company to analyse its need and directions into the distant future involving a technological change.