Capital budgeting techniques used by small business firms in the 1990s.: An article from: Engineering Economist

This digital document is an article from Engineering Economist, published by Institute of Industrial Engineers, Inc. (IIE) on June 22, 1997. The length of the article is 3789 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the author: In recent times, small business firms have created 80 percent of the new jobs in the United States. Thus, their methodology for capital investment decisions is very important, though it continues to be somewhat different from that used by larger business firms. A questionnaire survey with 232 small business respondents indicates that the payback method is still the preferred approach by 42.7 percent of the firms. Unlike many larger firms, their time horizon is often the period over which a financial institution will extend them funding. In any event, the "average" minimal payback period in the survey averaged 2.81 years, a time period far shorter than the useful life of the asset and one that would indicate a required return far higher than most firms anticipate. Somewhat encouraging was the increased use of discounted cash flow methods (27.6 percent), which is a higher rate of utilization than that indicated in other surveys of smaller firms over the last few decades.

Citation Details
Title: Capital budgeting techniques used by small business firms in the 1990s.
Author: Stanley Block
Publication:Engineering Economist (Refereed)
Date: June 22, 1997
Publisher: Institute of Industrial Engineers, Inc. (IIE)
Volume: v42 Issue: n4 Page: p289(14)

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