UTILIZATION OF CAPITAL BUDGETING AS AN OPTIMAL TOOL FOR INVESTMENT ANALYSIS IN MANUFACTURING COMPANIES IN ENUGU AND ANAMBRA STATES


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TABLE OF CONTENTS

TITLE PAGE
APPROVAL PAGE
CERTIFICATION
DEDICATION
ACKNOWLEDGMENT
TABLE OF CONTENTS
LIST OF TABLES
LIST OF FIGURES
ABSTRACT

CHAPTER ONE: INTRODUCTION
Background of the Study
Statement of the Problem
Purpose of the Study
Research Questions
Hypotheses
Significance of the Study
Delimitation of the Study

CHAPTER TWO:  REVIEW OF RELATED LITERATURE
Conceptual Framework
Company
Manufacturing
Manufacturing Company
Capital
Investment
Budget
Investment Analysis
Capital Budgeting
Utilization of Capital Budgeting for Investment Analysis
The Need for Capital Budgeting Decision Processes in corporate planning
Management Compliance in the use of Capital Budgeting Techniques
Utilization of Capital Budgeting by Manufacturing Companies for Investment  Analysis
Outsourcing of Capital Expenditure Decisions and the Prospect of Manufacturing Companies
The Effect of Utilization of Capital Budgeting on companies earnings
Constraints to Effective use of Capital Budgeting for Investment Analysis
Strategies for Improving on the use of Effective Capital Budgeting
Theoretical Framework
Quantity Theory of Money
Liquidity Premium Theory
Arbitrage Theory of Capital Assets Pricing
Utility Theory
Portfolio Investment Theory
Dominant Theory of Budgeting
Related Empirical Studies
Summary of Related Literature

CHAPTER THREE:            METHODOLOGY
Design of the Study
Area of the Study
Population for the Study
Sampling Technique
Instrument for Data Collection
Validation of the Instrument
Reliability of the Instrument
Method of Data Collection
Data Analysis Technique

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
Major Findings of the Study
Discussion of Major Findings

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Restatement of the Problem
Summary of the Procedures Used
Summary of Findings
Conclusions
Implications for Accounting Education
Recommendations
Suggestion for Further Research
REFERENCES





ABSTRACT

The major purpose of the study was to determine the extent to which capital budgeting is being utilized as a tool for optimum investment analysis in manufacturing companies in Enugu and Anambra States. The study adopted a survey research design. Seven specific purposes were developed in line with the major purpose of the study. The study answered seven research questions and tested five hypotheses at 0.05 level of significance. The population for the study consisted of 552 management staff of the 138 registered manufacturing companies operating in Enugu and Anambra Sates. Stratified random sampling technique was used to select a total of 336 management staff of 84 manufacturing companies which therefore constituted the sample. The questionnaire was structured on a 5-point rating scale and was validated by five experts; two from the Department of Vocational Teacher Education, University of Nigeria, Nsukka; two from Accountancy Department of University of Nigeria, Enugu Campus and one professional Accountant from Bursary Department of the University of Nigeria, Nsukka. Their suggestions were incorporated to improve the final draft of the instrument used for the study. Cronbach Alpha reliability coefficient of 0.95 was obtained for the entire items in the instrument. While the 7 clusters had Cronbach Alpha coefficients of 0.959, 0.953, 0.967, 0.932, 0.972, 0.940 and 0.984 respectively. A total of 320 of the 336 copies of the questionnaire administered were retrieved representing about 95% retrieval. The data collected were analyzed using frequency, percentage and mean for answering the seven research questions while t-test statistic and analysis of variance (ANOVA) were used in testing the five null hypotheses at 0.05 level of significance and 318 degree of freedom (df) for the t-test statistic. The major findings of the study were: 1) capital budgeting decision processes were used to a little extent to aid corporate planning; 2) management complied to a little extent with the use of capital budgeting techniques for investment analysis; 3) balancing strategic management consideration with capital budgeting evaluative techniques will improve on effective use of capital budgeting for investment analysis. It was concluded that manufacturing companies utilized non discounted investment evaluation techniques to a great extent for investment decisions. Based on the findings and conclusion, it was recommended that management should ensure the use of discounted capital budgeting techniques for investment analysis, and allow financial managers free hand in project evaluation and selection.




CHAPTER ONE

INTRODUCTION

Background of the Study

A company is a form of business organization, a corporate body or a corporation, generally registered under the company’s Act or similar legislations. It is a legal entity, created under an enabling law of the government, having unlimited life span and limited liability. Igben (2007) defines a company as a body corporate, having a distinct legal personality created by or under an enabling statute of the government. A company is a form of business organization, whose characteristics include; limited liability, corporate body, right to sue or be sued, enter into contracts, owe debts, pay debts, pay taxes, pay dividend from earnings, and neither the death nor the bankruptcy of any of its members can force it to liquidate (Chartered Institute of Management Accountants (CIMA), 2004).

Manufacturing companies are companies that convert raw materials and component parts into consumer, and or industrial goods (Garner, 2001). Manufacturing companies are companies that engage in production (i.e. business organizations which creates utility). The manufacturing sub-sector can be classified based on two major sub-division; either in accordance with area of coverage, or in relation to its capital base. Based on area of coverage, four distinct groups are identified, namely: the multi-nationals, the nationals, the regional and the local manufacturing companies. Based on size of capital, four companies can be identified, namely: the micro cottage, the small scale, the medium scale, and the large scale manufacturing companies. However, manufacturing companies as is used in this....



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