In financial management, which process is typically used to evaluate major potential projects or investments?

Capital budgeting is the process used to evaluate major potential projects or investments. This process is critical for financial management as it involves assessing the long-term profitability and viability of specific investments. It encompasses various techniques such as net present value (NPV), internal rate of return (IRR), and payback period analysis, allowing firms to make informed decisions about which projects to undertake. By analyzing cash flows associated with investments, capital budgeting helps organizations prioritize projects, allocate resources effectively, and ensure that the investments align with their strategic goals.

In contrast to capital budgeting, operational planning focuses on short-term objectives and the execution of daily activities rather than evaluating major investments. Market research is primarily concerned with gathering information about consumer preferences and market conditions, which helps inform marketing strategies and product development. Financial forecasting involves predicting future financial conditions and performance, but it does not specifically evaluate the viability of individual projects or investments.