THE CAPITAL INVESTMENT APPRAISAL A COMPARATIVE STUDY BETWEEN PUBLIC AND PRIVATE COMPANIES (A CASE STUDY OF PHINOMAR NIG LTD)
ABSTRACT
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 business studied.
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.
CHAPTER ONE
INTRODUCTION
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 investment appraisal.
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
Adequate capital
Well defined objective
An adequate accounting system
Competent management
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.
