Capital Project

See Also:
Cash Flow Projections
Return on Capital Employed (ROCE)
Return on Invested Capital (ROIC)
Paid in Capital (APIC)

Capital Project Definition

A capital project, defined as any project which requires capital flows for completion, usually refers to a project which requires large sums of capital. It is generally any project which requires consistent flow and management of capital to ensure successful completion. Due to this fact, an example of a project would be the building of a sky scraper, creation of an oil pipeline, or in the context of government, the building of a highway system. Capital project analysis is a constant struggle in works or large scale.

Capital Project Explanation

A capital project, explained sometimes as a function of “big” government or business, requires excellent skills of project management. If a sky scraper were to be built, a management team would have to be put in place. Materials, subcontractors, government permits, and many other issues would have to be solved for everything to receive a finishing touch. For this reason, capital project management must be executed to a “T”. There must be a team of human resources for every sub project, say permits and compliance. In this way, a capital project justification starts from an initial opportunity and flows from the initial founder to the detail oriented specialist. Obviously, this would require large amounts of capital.

Capital Project Example

Vince is the owner of a large commercial real estate firm. He has grown his success, over time, and now owns buildings in many major cities. Vince wants to see where his luck will take him. Essentially, Vince works on capital project planning all day long.

Vince starts by creating a plan. Once he has decided how he will finance, build, and market the building he steps into action. He begins by speaking with an investment banker. To keep it all in place, he begins the process of capital project accounting now by hiring an accounting team as soon as possible.

Vince has used the connection he has with an investment banker to receive funds from the investment branch of a major corporation. Only a company of massive size will be able to assist in an operation this large. He will need to control his capital project fund carefully to ensure a smooth process.

Vince begins the next project by speaking with an architect. The company he finds eventually provides blueprints and referrals to quality contracting companies.

Vince knows he has his work cut out for him. Still, he appreciates growing the scale of his work. Vince wants to challenge his boundaries and sees this as an excellent opportunity. Though Vince has a lot of stress at work, he leaves every day with a smile.

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