Capital Budgeting Practices in Punjab-Based Companies

Investment decision, popularly known as capital budgeting decision, is one of the most important decisions that finance managers have to take. In the current era of globalization and competition, selection of profitable investment opportunities is a must for the survival of any company. A number of studies have shown that companies employ several capital budgeting techniques while selecting a project. Based on a primary survey, the present study examines the current status of capital budgeting and explores the techniques preferred by Punjab-based companies. The study also seeks to find whether the factors such as size of capital budget, age of the company and nature of industry have any influence on the choice of capital budgeting methods. As it is found that most of the companies pursue non-discounted methods, the study suggests that they adopt techniques like Net Present Value (NPV) and Internal Rate of Return (IRR), which could deliver better results.