Capital budgeting in medium-sized businesses

As a management responsibility capital budgeting is of considerable importance, especially in view of the rate of technological advance. Capital investment in the U.K. continues at a high level despite the widespread recession. Considerable literature exists upon the subject of the planning and control of capital expenditure. Surveys have been published comparing actual practice with the theoretically superior methods but the studies have been largely confined to investigating the tactics of major companies. This thesis seeks to present conclusions upon the extent to which medium-sized companies conform to the theoretical model and to compare their adherence with that of the large firms. As preliminary stages the actual systems of one medium-sized firm were examined in detail and the availability of computer software packages for fixed asset accounting was surveyed. Following a pre-test, a postal questionnaire was circulated to a broad sample of medium-sized firms and from the replies their capital budgeting systems were delineated, compared with the conceptual model and, in turn, with the practices of the larger firms previously researched. The research revealed that the firms are well organised in their capital budgeting procedures and conform to the conceptual model to an equal or greater degree than the large organisations. It was noted, however, that the firms placed emphasis upon those sections of the model with particular reference to their particular circumstances, and some respondents mentioned aspects of their methods where improvements were to be sought. These conclusions were evident subject to the limitations imposed by the sample size affecting the value judgements, and the research also revealed aspects of the subject worthy of further study.