ASSESSING THE EFFECT OF CAPITAL BUDGETING DECISIONS ON PROFITABILITY IN MANUFACTURING FIRMS: A CASE STUDY OF MUKUWANO MANUFACTURING COMPANY, KAMPALA, UGANDA

Abstract

The study purpose was to investigate the relationship between capital budgeting decisions on profitability in manufacturing firms. Capital budgeting particularly addressed five areas of the study that included capital budgeting decisions (acquisition of long-term assets, replacement of long-term assets, investment appraisal techniques, outsourcing expenditure and working capital decisions) had a biggest and significant effect on profitability of the organizations. This study basically involved survey of the manufacturing company known as Mukwano group of companies, in Uganda. Total of 240 questionnaires were disturbed into the respondent and 152 questionnaires were returned so the data was analyzed through “Statistical Package for Social Science” SPSS Version 19. Multiple regression analysis and correlation were used to analyses the data. The findings show evidence of that there is significant and positive correlation between five dimensions of capital budgeting decisions and profitability of the organizations. The findings set up that there was relationship between the independent variables capital budgeting decisions and profitability and were positive relationships between capital budgeting and profitability of the firms under the study. Finally, the researcher has developed a conceptual framework based on the literature reviews, and from there the researcher constructed the research`s hypothesis. Foundation on the result, theoretical implications, limitations, conclusion and suggestions for future research are also highlighted.