1. What long term goals might we be trying to accomplish by buying capital assets? Why does a company make such

long term commitments? Why not just rent or lease everything?

2. How does the company know that it needs to spend next year on capital expenditures? Do you think that needs arise, such as that we need more space or another machine or truck, as we are preparing the operating budget (the revenues and expenses) because of expected changes in revenues and expenses? The need to budget new capital assets comes to management in a dream? What do you think is a usual typical approach to determine current and future capital asset requirements? Please explain. It will be helpful to provide an example.

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