Company budgeting involves allocation of source financial
resources to long term investment. Thus, because of the involved capital there
is need for adequate manager. Through the aid of theories and provided with
capital budgeting techniques that aid capital budgeting appraisal. This study
investigate, the subject of capital budgeting in relation to public and private
companies. The companies use such a management tool companies uses in which the
application of such in the private and public sector differ.
Hence the research work focuses on organization selected from the
public and private sector and the selection was based on a random selection of
companies that broadly represented both companies. Findings of the study
revealed that capital budgeting as investment appraisal techniques was employed
more by public companies. Also business and finance theories such as return,
profit and loss analysis and accounting rate of return are employed in the
This work has recommended possible way” of improving capital
budgeting in the private sector such as improvement and increasing in methods
adopted and improvement in management approach to capital budgeting.
1.0 An overview of the study
1.1 Statement of the study
1.2 Objective of the study
1.3 Scope and limitation of
1.4 Significant of the study
2.0 Definition of capital
2.1 Net present value
2.2 Internal rate of return
2.3 Profitability index
2.4 Payback period
2.5 Accounting rate return
2.6 Investment decision
2.7 NPV version IRR
2.8 Public company
2.9 Private company
3.0 Research methodology
3.1 Source of data
3.2 Population of study
3.3 Sample size
3.4 Research investment
3.5 Data analysis technique
3.7 Limitation of the study
Analysis interpretation and presentation of data
5.0 Summary of findings
Business is all about investment. Investment involves a decision
to part with present wealth or asset with hope of increasing the value of the
wealth in future. A business right then be defined as an economic activity oriented
towards producing goods and services at a profit for satisfaction of mankind.
Business organization brings man, money and material together in a
concerted effort to increase the value of all these resources through a form of
synergism, whereby than its parts. The business organization has it profit
making objectives as one of its motivating forces. A major tool used by
business manager in other to achieve the organizational goal is capital
The importance of capital investment appraisal cannot be over
emphaized, because management of any business needs other essential to be
financially successful. Among these are the following:-
A product or service in demand
Well defined objective
An adequate accounting system
This research makes a critical look at the subject of capital
investment appraisal, with special emphasis on capital budgeting.
Capital expenditure involves more or less a permanent commitment
of large sum of money and decision concerning them significant long term effort
on the economic health of any concern. This gives room for careful analysis on
the part of management in decision involved foregoing present consumption in
the hope of greater future consumption. In order to forgo present consumption
management should be prepared to invest on capital projects, fully appraised
such that it will ascertain whether it provide a return equal to or greater
than required by the shareholders.
Capital budgeting involves the decision making process with
respect to involvement in fixed assets qualified call. It involves measuring
the net cash inflow associated with investment proposals and evacuating the
attractiveness of these cash relative to the project cost.
This research will be studing capital budgeting in public
companies and private companies. Public companies here would mean corporations.
These are in form of business organization that exists because the law has
confirmed existence on it. The country today has many of such corporation.
These public companies are mostly multi – nationals whose equity holding run
into millions. Let us find out if capital investment is appraisal before being
venture and if they are to what extent are they appraised.
The other case in this study is the private companies. These
private companies are more in number than the multi –national companies.
Private companies unlike the public companies do not have legal entity and have
very much smaller capital base. These private companies are however larger in
number and are set up more often. They also have to make investment decision
like starting a new of product, buying current automatic machinery to replace
out-dated ones. Choosing between building new factory or expanding the
facilities in the existing factory, since these two forms of business makes
similar capital investment decisions, the question is if we the same means in
subjecting capital investment alternatives to text before decision are made.
The research also tried to establish if this management tool is used by any of
this business organization.
If it is been to what extent is it being applied? It is also aimed
at finding out if there are any disparities existing in appraisal methods and
why these difference exist. This research work also tries to print out ways of
employing capital investment appraisal in private companies.
STATEMENT OF THE PROBLEM
Phinomar Nigeria Limited did not use capital budgeting as an
appraisal tool because the company business operation did not encourage the use
of capital budgeting is an investment appraisal instrument
Unreliable methods of keeping records were discovered as a common
practice in Phinomar Nigeria Limited.
Phinomar Nig. Ltd. Management did not term it necessary to use any
appraisal tool for management decision.
Phinomar accounting staff employed for the purpose of transitional
accounting function was utilized for recording keeping.
OBJECTIVE OF THE STUDY
To determine to what extent did Phinomar Nigeria Limited did not
encourage the use of capital budgeting as an investment appraisal
To find out reason. For inadequate or non – existence of the
capital investment appraisal in Phinomar Nigeria Limited.
To suggest solution towards a better structure and effective
conduct of appraisal in Phinomar Nigeria Limited. Also suggest possible ways of
encouraging the Phinomar to use and possible improve on capital investment
To examine the methods of investment appraisal in PHINOMAR NIG –
To determine whether they have approved adequate or otherwise.
The research questions are as follows:
Had PHINOMAR NIG.LTD applied these management tool for their
investment appraisal instrument.
To what extent is it being applied in the PHINOMAR as an
instrument for the capital budgeting.
Does any disparities existing in applying management tool and why
these difference exist.
To what extent does it help PHINOMAR approved adequate in taking
decision in their business.
SIGNIFICANCE OF THE STUDY
The important of the study of
Capital investment appraisal in Phinomar Nigeria Limited involves
the decision making process with respect to investment in fixed assets
It helps the manager to determining the long term objective of the
The successful administration of capital investment appraisal in
Phinomar Nigeria Limited involves
Generation of investment proposal
Selection of project budget
Execution of project budget
Estimation of cash flow
It help assist manager in Phinomar to improve and adopt strategies
to reduce loss of capital in the business operation.
It ensure reliable methods of keeping records.
TERMS AND CONDITIONS
TERMS AND CONDITIONS APPLY
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