Which method is commonly used in capital budgeting?

The method commonly used in capital budgeting is cash flow analysis. This approach involves estimating and evaluating the future cash inflows and outflows associated with a capital investment project. By assessing the potential cash flows, businesses can determine whether the expected returns justify the initial investment. This analysis is crucial because it helps in understanding the time value of money, enabling companies to calculate metrics such as Net Present Value (NPV) and Internal Rate of Return (IRR). These metrics are essential for making informed decisions about which projects to undertake or reject, ensuring that capital is allocated efficiently to maximize profitability.

The other options, such as market share analysis, employee performance appraisal, and product pricing strategy, focus on different aspects of business management and do not directly relate to the process of evaluating capital investments based on expected cash returns.