Write a RESPONSE to the classmate’s discussion post below on what is the purpose of capital budgeting and how does it align to the corporate or finance strategy?

Response

Write a RESPONSE to the classmate’s discussion post below, analyzing their answer and findings. 10 -12 sentences.:

1. What is the purpose of capital budgeting and how does it align to the corporate or finance strategy?

The purpose of capital budgeting to determine which major projects or investments a company should pursue. During this process, the firm is analyzing whether or not the project/investment will provide significant returns compared to the initial cash spent on the project/investment. This type of analysis involves using present value, discounted cash flow, and payback analysis, all of which we are currently learning. The purpose of capital budgeting aligns with ADP’s strategy because ADP’s strategy consists of heavy talk about growth. The firm looks to grow its offering in HCM solutions, HR outsourcing solutions, and global solutions. Essentially, ADP’s strategy aims to continue to innovate and develop new softwares that will make ADP stand out among competitors. Therefore, capital budgeting aligns with the firm’s strategy because capital budgeting is a necessary process in fostering growth and innovation. Big projects and firm-changing investments are the steps that evetnually need to be taken in order to grow the company on a significant scale.

2. What are the expected capital expenditures for your company for this year? What are they investing in capital assets?

The expected capital expenditures for the year 2022 are estimated to be somewhere between $200 million and $225 million. In terms of capital assets, the firm is mainly investing in its Employer Services strategic business unit. For the year 2021, $50,279.3 million were invested in Employer Services.

2. In the 10-K Item 6 Selected Financial Data – Review some interesting events that impacted the financial statements of the company?

Under Item 6 for ADP’s 10-K, it states that this section is not applicable for ADP. However, in Item 7, there is some talk about how ADP’s strategy and offering is evolving as the world of work evolves. The pandemic has had a mjor effect on what is considered to be “normal work operations”. Now, so many people work from home and other significant changes in the world of work have been made. Item 7 discusses how ADP has had to account for these changes in its HR offerrings sich HR practices are changing with the world of work. These events would have an effect on the company’s overall financials as it supports the fact that ADP is facing a growth phase.

3. In the 10-K Item 3 Review some of the more interesting legal proceedings against the company.

Item 3 does not contain a lot information for ADP. In fact, this section only has 2 sentences for the firm. Essentially, what these sentences are saying is that ADP is not majorly concerned with the impact of legal proceedings on its overall health. The firm knows legal proceedings are possible, but it states they have strong defenses in place in the case that something does come up. The firm states that its financial condition, results of operations, and cash flows are not threatened by potential legal proceedings.

Write a RESPONSE to the classmate’s discussion post below on what is the purpose of capital budgeting and how does it align to the corporate or finance strategy?
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