Investment Appraisal Techniques And Financial Performance Of Small And Medium Enterprises In Nairobi City County, Kenya

ABSTRACT

Small and Medium Enterprises play a major role in the social economic development of

any country, however these enterprises face investment decision problems which inhibit

their financial performance. Poor investment decisions have been blamed for high rate of

failure and closure. Thus, the purpose of the study was to determine the effects of

investment appraisal techniques and financial performance among small and medium

enterprises in Nairobi County, Kenya. The objectives of the study were to: determine the

effect of Accounting Rate of Return, payback period, Net Present Value and Internal Rate

of Return on financial performance among small and medium enterprises in Nairobi

County, Kenya. The information that provided by this research will benefit policymakers,

community members and academicians. The study adopted cash flow theory of

investment, Theory of Investment Decisions, Agency Theory and Q Theory of Investment.

It adopted a descriptive survey research design with a target population of 71,195 licensed

Medium Enterprises with Nairobi County. The sample size was 384 Small and Medium

Enterprises. The researcher adopted cluster random sampling technique and collected data

using questionnaires. The instruments were validated by the supervisors. Reliability of the

instruments was determined through a pilot study where a Cronbach alpha coefficient of

0.7 was considered appropriate. Quantitative data was analyzed using descriptive statistics

and inferential statistics and presented in tables. The study revealed that Accounting Rate

of Return (t =6.702, P