ISSN 2756-3308
African Journal of Estate and Property Management ISSN 9671-8498 Vol. 3 (2), pp. 001-007, February, 2016. © International Scholars Journals
Full Length Research Paper
An investigation into the impact of investment appraisal techniques on the profitability of small manufacturing firms in the Nelson Mandela Bay Metropolitan Area, South Africa
Fatoki Olawale1*, Okubena Olumuyiwa2 and Herbst George1
1Department of Business Management, University of Fort Hare, South Africa.
2Department of Accounting, Vaal University of Technology, South Africa.
Accepted 17 September, 2015
Abstract
This study investigated the impact of investment appraisal techniques on the profitability of small manufacturing firms in the Nelson Mandela Bay area of the Eastern Cape Province, South Africa. Small firms are widely considered important to solving South Africa’s unemployment problems and the rejuvenation of its economy. The study used survey data generated from one hundred and twenty four small manufacturing firms in the Despatch, Uitenhage and Port Elizabeth areas of the Nelson Mandela Bay to analyze their capital budgeting practices. The study ascertained, by statistically testing the hypotheses of the study, that small manufacturing firms’ owners do not use sophisticated investment appraisal techniques when evaluating their proposed projects. A multiple regression analysis was employed to confirm the impact of investment appraisal techniques on the profitability of the small manufacturing firms. The study concluded that the use of non-sophisticated investment appraisal techniques has a negative impact on the profitability of small firms. Recommendations were made to improve the managerial and financial skills of the owners of small manufacturing firms.
Key words: Small firms, investment appraisal techniques, profitability.