INFLUENCE OF CAPITAL BUDGETING TECHNIQUESON THE FINANCIAL PERFORMANCE OF COMPANIES LISTED AT THE RWANDA STOCK EXCHANGE
Journal Title: European Journal of Business and Social Sciences - Year 2017, Vol 6, Issue 6
Abstract
this study sought to determine the effect of capital budgeting techniques on the financial performance of companies listed at the Rwanda Stock Exchange. The study employed a descriptive design. The target population for the study was all the seven companies listed at Rwanda Stock Exchange. Data was collected from 35 respondents who comprised of chief finance officers (CFO), Chief executive officers (CEO), managers and accountants of the 7companies listed in the RSE. This study employed both primary and secondary data. Primary data was collected through questionnaires. The study findings indicated that capital budgeting has effect on financial performance on the studied companies as indicated by 90% of the study respondents. The findings also showed that the most common capital budgeting techniques practiced by most of the company is internal return rate (45%) followed by 29% net present value and 26% payback period. Further the findings indicated that 78% of the variation in company’s financial performance could be attributed to Net Present Value, Internal Rate of Return and Payback Period together. All the three independent variables were found to important factors in enhancing better financial performance in the company. However, Net Present Value (0.140) has greater effect on the company financial performance followed by Internal Rate of Return (0.118) and lastly Payback Period (0.104). The study concluded that most companies employed net present value, payback period, internal rate of return as budgeting techniques. Also, the study concluded that there is a positive and significant association between the capital budgeting techniques and the financial performance of companies.
Authors and Affiliations
Liliane Gasana| Jomo Kenyatta University of Agriculture and Technology, Rwanda, Dr. Paul Kariuki| Jomo Kenyatta University of Agriculture and Technology, Rwanda
Keywords
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