Capital budgeting Techniques on firm`s profitability. A case of Ariston Management Services T/A Blended Tea Factory

Abstract

This study sought to examine the extent to which capital budgeting techniques enhances firms‘ profitability at Blended Tea Factory. The topic was motivated by poor investment decisions by Blended Tea factory that resulted from lack of knowledge about capital budgeting techniques. The objectives of the study were to determine the effectiveness of capital budgeting techniques on firms‘ profitability. The review of literature revealed that investment appraisal, through the contingency and portfolio theory positively influence firm profitability.To fully address the problem at hand the researcher used positivist research philosophy and deductive research approach which allowed the researcher to generate explanatory associations or causal relationships between the investment appraisal and firm profitability. The research sample was made up of human resources department, purchasing department, accounting department and senior management at Blended Tea Factory. The researcher used stratified sampling technique to get information from the interviewees who had deeper knowledge of the area under study.The data collected was sorted and presented on bar graphs, pie charts and tables. From the analysis, most respondents agreed that Capital budgeting techniques are effective in determining profitability because they maximize returns and reduce the risk of funding failed initiatives is essential for long-term growth and success. The study concluded that capital budgeting techniques are effective in determining Blended Tea Factory profitability because they maximize returns and reduce the risk of funding failed initiatives is essential for long-term growth and success. From these findings, it was recommended that it is important for the owners of manufacturing industries to get involved in training and skill development. Low levels of financial literacy can impact the degree to which entrepreneurs use sophisticated investment appraisal techniques