PERCEPTION OF CAPITAL BUDGETING AS A TOOL FOR OPTIMUM INVESTMENT ANALYSIS. A CASE STUDY OF SELECTED COMPANIES IN PORT HARCOURT

PERCEPTION OF CAPITAL BUDGETING AS A TOOL FOR OPTIMUM INVESTMENT ANALYSIS. A CASE STUDY OF SELECTED COMPANIES IN PORT HARCOURT

ABSTRACT

Capital investment decisions are that decision that involves current outlays in return for a stream of benefits in future years. The distinguishing future between short-term decision and capital investment (long-term) decision is time. The objective of this study is the applications of capital budgeting patterns to enable the management of companies make credible investment decisions in areas like: Determining which specific investment projects the firm should accept. Determining the total amount of capital expenditure that the firm should undertake and determining how this portfolio of projects should be financed. As for the methodology, questionnaires were distributed to eight (8) companies in Port Harcourt. A total of 10 questions were proposed in the questionnaire to enable us carry out the study. The findings are as follows:

That capital expenditure decisions made by companies have greater impact on their long-term operations and survival. That company employs professional financial manager to manage their capital investment activities. Those companies employ appraisal techniques in making capital budgeting decisions, particularly, the net present value technique, and, That management of companies is responsible for all capital expenditure decisions and also authorizes such expenditure. Recommendation of computerization, application of DCF, adequate planning and control of capital budgeting decisions and training. My suggestion is that if all the recommendations will be adapted, it will enhance good decision making on capital budgeting.