Which of the following best describes the capital budget used by managers?

• A. Routine operating expenses and daily supplies within the annual budget.
• B. Plans for the purchase of buildings or major equipment, which include equipment that has a long life (usually greater than 5 - 7 years), is not used in daily operations, and is more expensive than operating supplies.
• C. Short-term purchasing for staff uniforms within the current cycle.
• D. Replacement of small, inexpensive items used in daily care.

Answer: (B)

Capital budgeting focuses on planning for long-term investments in assets that will be used for many years and aren’t part of daily operations. In health care, this means decisions about purchasing buildings or major equipment whose useful life extends beyond a single year and which are substantially more expensive than routine supplies. These investments require multi-year planning, formal approvals, and consideration of cash flow, financing, and depreciation, rather than the routine, day-to-day expenditures covered by the operating budget. The description matches the capital budget because it targets large, long-lived assets rather than small, ongoing purchases or replacements.