decisions are the mostimportant and criticaldecisions that directlyinfluence the company’s performance in terms of profitability and liquidity.These decisions can lead thecompany to reach the heightsof success and can even leadthe company to face disaster.So effective capital budgetingdecisions are key to theorganizations’ success because they involve risk andunderstanding of uncertaintyabout each investment and project, which is usuallydifficult to analyze.
OVERVIEW / ANALYSIS
Since 3M makes almost 60% of itsrevenue from international marketsthat’s why its primary growth strategyis based on continuing internationalexpansion and producing moreinnovative products into new or existing markets. Currently 3Mmanages its business operations in six business segments i.e. Health care,Industrial and Transportation, Displayand Graphics, Consumer and Office,Electro and communication, Safetysecurity and protection services.
3M’s FINANCIAL MANAGEMENTSTRUCTURE IN TERMS OFCAPITAL BUDGETING DECISIONS
3M’s capital budgeting decisions aremostly related to its R&D,acquisitions, strategic alliances,mergers, investments in plant, property, equipment and usually inavailable for sale securities.3Minvests more than $1 billion per year in research and development andrelated activities, and is awardednearly 600 U.S. patents each year.3M’s capital expenditures totaled$943 million in 2005 and areexpected to increase up to $1.1 billionin the year 2006.
A brief overviewabout the company’s capital budgeting activities over the past fewyears is given below:
In 2005, 3M spent about $26million for capital projects relatedto protecting the environmentwhich are further expected toincrease to $35 million for new programs to build pollutioncontrol devices, modern facilitiesand modify manufacturing processes to minimize waste andreduce emissions.
In 2005, 3M announced to build an LCD optical filmmanufacturing facility in
Only few of the materialinvestments have been mentioned inthe analysis to give the readers ideaabout the company’s capital budgeting activities.