The application of investment appraisal of techniques in the local industry

Abstract

This study focuses on the application of Investment Appraisal Techniques (IAT) in the local industry. For this purpose extensive interviews were held with a number of financial controllers, audit firms and owners of small businesses. In view of the amount of money the local industry invests yearly, it was interesting to see whether financial managers apply some sort of decision criteria in order to scrutinise the proposed investment. The study sought to establish which techniques are used, the extent of their usage, the method of application and the reason for their use. It is further indicated that there is widespread use of the traditional techniques particularly Net Present Value and Payback. These techniques are applied in accordance to theory, although with some reservations. The modified traditional techniques and other new techniques, resulted to be barely used even though the nature of investments undertaken is changing to one which requires new and modified techniques. Certain adjustments which can be employed locally in order to adjust better to the local situation of small firms, are also highlighted.