CAPITAL BUDGETING TECHNIQUES AND GROWTH OF SMALL AND MEDIUM ENTERPRISES

(SME’S) UNDER UGANDA WOMEN ENTREPRENEURS’ ASSOCIATION LIMITED (UWEAL)

Statement of the problem.

STATEMENT 1 (DESCRIPTION OF THE IDEAL SCENARIO)
Describe the goals, desired state, or the values that your audience considers important and
that are relevant to the problem.
Usually business are established to accomplish their set goals which includes profit making,
market share, growth and for these goals to be attained, capital budgeting decision must play a
significant role (Pearce, 2019).

STATEMENT 2 (THE REALITY OF THE SITUATION)

Describe a condition that prevents the goal, state, or value discussed in statement
1 from being achieved or realized at the present time.
Unfortunately, Small and Medium Enterprises have traditionally made limited use of capital
budgeting techniques when making long-term commitments of resources to various projects.
They invest too little in profitable projects and much in Non-profitable projects, resulting in
investment problems which hinders growth of the businesses.
STATEMENT 3 (THE CONSEQUENCES FOR THE AUDIENCE)
Using specific details, show how the situation in statement 2 contains little promise of
improvement unless something is done.  Then emphasize the benefits of research by
projecting the consequences of possible solutions as well.
Financial Performance of Small and Medium Enterprises in Nakawa division of Kampala
district continues to decline in terms of limited liquidity for discharging financial obligations
and sustaining business operations. This is worsened by profitability levels at an average of 26%
and a return on investment of 16 % (UBOS, 2017). This is because some business owners do
evaluate their projects, while others don’t.
Therefore, management needs to use capital budgeting techniques to evaluate new projects to
determine which projects will yield the most return over an applicable period of time. The
available methods include Net present Value, Internal rate of return, pay Back period and
Accounting Rate of return.
What motivates you to do research?  Even though there are many methods or techniques
suggested, it does not mean that business owners are willing or ready to accept and apply them
in their day-to-day activities. Because of that, this survey is intended to find out the realities of
Whether there has been growth in small and medium enterprises when using capital budgeting
techniques in their investment decisions.

Purpose of the study

The general role for this study is to determine the relationship between capital budgeting
techniques and growth of Small and medium enterprises registered under Uganda Women
Entrepreneurs’ Association Limited (UWEAL).

Research objectives
i. To find out the capital budgeting process adopted by Small and medium enterprises in
Kampala district.
ii. To establish the capital budgeting techniques adopted by Small and medium enterprises
in Kampala district.
iii. To determine the relationship between capital budgeting techniques and growth of Small
and medium enterprises in Kampala district.
Conceptual framework

Independent Variable Dependent variable

capital budgeting techniques; PBP, ARR, NPV and IRR Growth: financial performance, business
risk management, market share.

Intervening variables

 Inflation
 Government policy
Control variables
 Demographics
Capital structure
 Competition
Firm size
 Political condition
Age of the firm
Leverage
Degree of risk
Industry factors like( growth, market
share, firm advertising, research and
development.).
 Statement of the problem.
Usually business are established to accomplish their set goals which includes profit making,
market share, growth and for these goals to be attained, capital budgeting decision must play a
significant role (Pearce, 2019).
Unfortunately, Small and Medium Enterprises have traditionally made limited use of capital
budgeting techniques when making long-term commitments of resources to various projects.
They invest too little in profitable projects and much in Non-profitable projects, resulting in
investment problems which hinders growth of the businesses.
Financial Performance of Small and Medium Enterprises in Nakawa division of Kampala
district continues to decline in terms of limited liquidity for discharging financial obligations
and sustaining business operations. This is worsened by profitability levels at an average of 26%
and a return on investment of 16 % (UBOS, 2017). This is because some business owners do
evaluate their projects, while others don’t.
Therefore, management needs to use capital budgeting techniques to evaluate new projects to
determine which projects will yield the most return over an applicable period of time. The
available methods include Net present Value, Internal rate of return, pay Back period and
Accounting Rate of return.
Even though there are many methods or techniques suggested, it does not mean that business
owners are willing or ready to accept and apply them in their day-to-day activities. Because of
that, this survey is intended to find out the realities of whether there has been growth in small
and medium enterprises when using capital budgeting techniques in their investment decisions.