Capital Budgeting Techniques And The Management Of Financial Resources In Oil Industrjes. Case Study: A Look At Kenol-Kobil Petrol Stations In Kenya

ABSTRACT

This paper will look at capital budgeting techniques employed by the oil firms in Kenya.

It will look at six major oil firms in Kenya based on their market share. Capital budgeting

or investment decision is a very critical area in the success of any firm Long term

investment aid a firm in determining the future of firm since the outlay is undertaken

today with the effect running into the unforeseeable future. This paper will be based on a

survey study and the findings will show the trend towards sophistication in capital

budgeting techniques employed by firms which is in support with past studies in this field

and generally more than one technique is employed. In particular it finds that firms have

integrated their techniques in their software packages thus making it easier to appraise

projects. It is however found that despite the move towards sophistication, traditional

payback method still plays a major role as a screening method in project appraisal. In

capital budgeting, risk is taken into account subjectively using both qualitative and quantitative techniques. The size of project, to some extent determines the technique employed. The allocation of resources to productive use by a firm will ensure the firm's growth and survival. Some projects are undertaken even when it does not meet the goal of the benchmarks set either due to their regulatory or safety needs inherent. Finally the paper will find that the main goal of any project is to maximize shareholders wealth as it will eventually lead to satisfying all stakeholders.