An assessment of management skills on capital budgeting planning and practices: evidence from the small and medium enterprise sector

Challenges and Opportunities in Adopting Capital Budgeting Practices

“…According to Nunden et al (2022), the responsibility for capital budgeting decisions in small and medium-sized enterprises lies with owners rather than managers. During the process of preparing capital budgeting, owners work with external parties who have expertise in capital budgeting.…”

“…What is the reason that owners seek the advice of experts? According to Nunden, Abbana, Marimuthu, and Sentoo (2022), it is a common observation that owners of small and medium enterprises often lack the necessary skills and training to effectively carry out the capital budgeting process.…”

“…The capital budgeting and planning process in small and medium enterprises (SMEs) requires the acquisition of various information from managers and owners (Awinja and Fatoki, 2021, cited in Nunden et al, 2022). This information includes factors such as potential risks and the net return on the capital budget (Sacks et al, 2018cited in Nunden et al, 2022.…”

“…Additionally, small business proprietors may require assistance in acquiring funding, a factor that could potentially influence their decisions about liquidity management and the maintenance of financial reserves. Furthermore, small business proprietors may encounter challenges in effectively assessing potential investments as a result of workforce constraints and limited expertise in investment evaluation (Nunden et al, 2022).…”

“…A capital budget organized by all future investment projects (Berk et al 2015, as referenced in Nguyen, 2019. Capital budgeting can be used as a filter before deciding to spend large sums of money on investment projects that require large sums of money, or it can be used to make a decision about whether or not to make an investment (Nunden, Abbana, Marimuthu, & Sentoo, 2022).…”