A Study on Capital Budgeting Practices and Their Role in Strategic Investment Decisions
A Study on Capital Budgeting Practices and Their Role in Strategic Investment Decisions
Dr. V.J.DEVA RAAJ
Professor, HoD
Department of MBA
V.K.R., & V.N.B. Engineering College, Gudivada, Andhra Pradesh, India-521301
M. Narendra
Assistant Professor
Department of MBA
V.K.R., & V.N.B. Engineering College, Gudivada, Andhra Pradesh, India-521301
Ghanta Naaga Jayasurya Sai Krishna
Student, Regd No: 24NH1E0010
Department of MBA
V.K.R., & V.N.B. Engineering College, Gudivada, Andhra Pradesh, India-521301
Abstract
Capital budgeting is a vital component of financial management that supports organizations in making effective long-term investment decisions. The present study aims to examine the significance of capital budgeting techniques in evaluating investment opportunities and facilitating strategic decision-making. The study adopts a descriptive research design and is based entirely on secondary data collected from financial reports, academic journals, books, company documents, and other relevant sources. Capital budgeting techniques such as Payback Period (PBP), Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Accounting Rate of Return (ARR) are analyzed to understand their role in assessing project feasibility and profitability. The study highlights that effective capital budgeting practices enable organizations to allocate financial resources efficiently, minimize investment risks, and select projects that align with long-term strategic objectives. Furthermore, the research emphasizes the importance of systematic investment appraisal in enhancing organizational performance, profitability, and sustainability. The findings indicate that organizations adopting structured capital budgeting procedures are better positioned to achieve competitive advantage and long-term growth. Overall, the study concludes that capital budgeting serves as a critical tool for strategic investment planning and plays a significant role in creating value for stakeholders through informed and rational investment decisions.
Keywords: Capital Budgeting, Strategic Investment Decisions, Net Present Value (NPV), Investment Appraisal, Financial Management.