Capital budgeting decisions and profitability in selected manufacturing companies in Bosaso, Somalia

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Kampala International University, College of Economics and Management
This study entitled Capital Budgeting decisions and profitability of selected manufacturing companies in Bosaso, Somalia. The objectives of the study included to; assess how acquisition of long term assets affect the profitability of manufacturing firms, assess how replacement of long term assets affect profitability of manufacturing firms, and to assess how investment appraisal techniques affect profitability of manufacturing firms in Bosaso, Somalia. The study employed a cross-sectional survey design (Salkind 2000), which was chosen because it enabled the researcher to study the experience of different manufacturing firms. The study used target population of 150 staff of selected manufacturing companies in Bosaso. Purposive sampling technique was employed and a sample size of I 09 was computed according to Sloven’s formula. A self administered questionnaire was designed and distributed to eight manufacturing companies in Bosaso, Somalia. Eventually, data was collected. entered into a computer and analyzed using Statistical Package for Social Scientists (SPSS). The analysis of the findings indicated that majority of the respondents reported that capital budgeting decisions affects the profitability of the firm, in which respect the manager’s objective is to select the combination that yields maximum production at the most reasonable price. Managers must therefore be able to understand costs associated with a particular piece of equipment. Basing on the findings. the researcher recommended that the governing boards of the selected Manufacturing Companies in Bosaso ought to embrace Capital budgeting in order to achieve sustainable profitability in their companies. The researcher concluded that the ability to appraise Capital budgeting projects creates a framework for businesses to plan out future long term direction.
A thesis presented to the College of Higher Degrees and research of Kampala International University Kampala, Uganda in partial fulfillment of the requirements for the Award of Master’s Degree in Business Administration (Accounting and finance)
Capital budgeting, Manufacturing companies, Profitability, Bosaso, Somalia