A capital budget sets aside funds for capital expenditures. These are primarily new pieces of equipment or facilities, to be used over a period of years. Strategic in nature, a capital budget involves looking at the long-term profit that’s likely to come from investing in that equipment or building.
Many companies allow for flexible budgeting, a process by which budgets are adjusted to match output and/or marketplace factors that influence the company’s revenues and expenses. Companies with a sudden short-term, unbudgeted income opportunity may create a flexible budget that adds to the expense side of the equation, but also adds corresponding revenues from product sales.