Question

how does net income have an effect on capital budgeting? what do non profit organizations do with excess revenue?

Answer 1

The cash flows that a firm generates through income goes into the projects as initial cash outflow, also for non conventional cash flows there will be cash outflows during the life time of a project. In certain projects firms spend the total cost and get paid at the end of the project,in that case if the cash flow from net income is not sufficient then a company might have to quit a project in between leading to huge loss. Hence, net income affects the capital budgeting decisions.

The non for profit (or non profit) organizations are the one that do not generate profits (or make money) for its owners
In case of not for profit companies, the excess revenue is used for exempt purposes, that is for charitable purposes, relief for poor, expenses for public benefits, donations etc