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Capital rationing is the process of selecting the most profitable projects in which to invest given a limited amount of available capital.

Cost of Capital refers to the return that is required to make a capital budgeting project, such as building a new factory, worthwhile.

Operating Cash Flow (OCF) is the cash generated from the normal operations of a business and is a factor considered in capital budgeting.

Payback Period is the amount of time it takes for an investment to generate an amount of cash flows equal to the initial investment. It is a simple way to evaluate the risk of an investment.

A sunk cost is a cost that has already been incurred and cannot be recovered and should not be considered in capital budgeting decisions.

IRR is the discount rate that makes the net present value of all cash flows from a particular project equal to zero. It is used to evaluate the attractiveness of a project or investment.

Real Options Analysis is an advanced capital budgeting strategy that recognizes the value of managerial flexibility in decision making under uncertain market conditions.

Discounted Payback Period is the time it takes for the present value of cash flows to cover the initial investment, taking into account the time value of money.

The Modified Internal Rate of Return (MIRR) considers both the cost of investment and the interest on the reinvestment of cash, providing a more accurate reflection of a project's profitability.

Non-discounted Cash Flow Methods are capital budgeting analyses that do not account for the time value of money, such as the Payback Period and the Accounting Rate of Return.

Sensitivity Analysis is a tool used in capital budgeting to test the sensitivity of the expected return of a project to changes in underlying assumptions.

Economic Value Added (EVA) is a measure of a company's financial performance that calculates the value created beyond the required return of the company's shareholders.

NPV is the difference between the present value of cash inflows and outflows over a period of time. It is used in capital budgeting to determine the profitability of an investment or project.

Incremental Cash Flows are the net additional cash flows generated by taking on a new project, which are used to analyze if the project should be pursued.

Hurdle Rate is the minimum rate of return on a project or investment required by a manager or investor, reflecting the risk level and the opportunity cost of forgoing the next best investment.

Break-Even Analysis is the process of determining when an investment will generate a cash flow equal to the amount invested, with no profit or loss.

Discounted Cash Flow Methods take the time value of money into account when assessing the value of future cash flows, such as NPV and IRR.

The Capital Asset Pricing Model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, factoring in the risk compared to the market as a whole.

Scenario Analysis is a process of analyzing possible future events by considering alternative possible outcomes, thus helping in capital budgeting to assess the impact of different scenarios on project profitability.

Capital Expenditure (CapEx) is funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

Profitability Index (PI) is a calculation that determines the value created per unit of investment, using the present value of future cash flows divided by the initial investment.

The Accounting Rate of Return (ARR) is the ratio of the average annual profit from an investment to the initial investment cost, highlighting profitability based on accounting measures.

Monte Carlo Simulation is a statistical technique used in capital budgeting that computes the probabilities of different outcomes in financial investment projects.

Terminal Value is the estimated value of a business or project beyond the forecast period when future cash flows can be estimated.