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Budgeting & Forecasting › Capital Budgeting

What is the difference between a screening and a preference decision?

Beginner

Answer

A screening decision determines whether a project meets a minimum acceptance standard (e.g., positive NPV, IRR above hurdle). A preference (ranking) decision chooses among several acceptable projects competing for limited funds. Screening filters; preference ranks the survivors.
Real-world example Projects first pass a positive-NPV screen, then compete for limited funds in a ranking decision.

Common follow-ups: What does screening decide? | When is a preference decision needed?

Capital Budgeting The Budgeting Process Capital Budgeting
All 34 Capital Budgeting questions