The Effects Of Capital Budgeting Decisions On The Firm's Profitability: A Case Study Of Manufacturing Companies In Hargeisa, Somalia

ABSTRACT

fhis study was entitled "The effects of capital budgeting decisions on the firm's profitability: a

;ase study of manufacturing companies in Hargeisa, Somalia" was presented after a study

:onducted in eight selected manufacturing companies in Hargeisa, Somalia in the year 2012.

mong the objectives of the study were to assess how acquisition of long term assets affect the

>rofitability of manufacturing firms, to assess how replacement of long term assets affect

,rofitability of manufacturing firms and to assess how investment appraisal techniques affect

,rofitability of manufacturing firms in Hargeisa, Somalia.

'he study employed a cross-sectional survey design extracted from Salkind, (2000), which

xamined several groups of people at one time. This was particularly chosen because it enabled

1e researcher to study the experience of different manufacturing firms on assessing the effect of

apital budgeting decisions which are common in all manufacturing firms because they heavily

~ly on property, plant and equipment in the production and delivery of goods to its customers.

'he analysis of the findings indicated that majority of the respondents reported that acquiring of

mg term assets affects the profitability of the firm, in which respect the manger's objective is to

~lect the equipment combination that yields maximum production at the best or most reasonable

rice. Mangers must be able to understand costs associated with a particular piece of equipment.

he study concluded that majority of the respondents use payback period in evaluation capital

rojects and recommended that further studies be conducted on the impact of the challenges of

1pital decisions on financial performance in manufacturing firms and the significance of udgeting in the resources allocation of the firms.