What is the primary purpose of a capital budget?

The primary purpose of a capital budget is to allocate funds for long-term investment projects. This type of budget is critical for organizations, including assisted living facilities, as it outlines how financial resources will be used for significant expenditures such as renovations, new equipment, and expansion projects.

By focusing on long-term investments, a capital budget helps ensure that funds are appropriately set aside for assets that will benefit the organization over multiple years. It takes into account the costs associated with these assets and analyzes potential returns on investment, which is essential for maintaining and growing the facility's services and capabilities.

In contrast, a budget that manages daily operating costs addresses the routine expenses required for day-to-day functioning, such as utilities or supplies. Tracking cash inflows and outflows pertains to liquidity management rather than long-term investments, and monitoring employee salaries and wages deals with ongoing operational expenses rather than capital expenditures.