Impact of Capital Budgeting Decision on Profitability of Firm – Selected Listed Automobile Companies in India

Abstract

Purpose: Profitability plays an important function in the business operations and determines the value by which a business is held. The study set to investigate the impact of capital budgeting decisions on profitability of Automobile 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.   Methodology: This study basically involved survey of the Automobile Companies listed in NSE in India. Any business that seeks to invest its resources in a project without understanding the risks and returns involved would be held as irresponsible by its owners or shareholders. This study considered 10 companies are taken from Automobile sectors, which is listed in NSE. Correlation and paired T test were used.   Findings: This study basically involved survey of the Automobile Companies listed in NSE in India.The findings set up that there was relationship between the independent variables of capital budgeting decisions and profitability. The study was examined the outcome of capital budgeting Impact on profitability of listed firms in India. The independent variables for the study were Capital Budgeting and Profitability.   Research implications:  it is evident that Maruti and Tata Motors produced positive and statistically significant values for this study (high t-values (12.37 and 11.26), p =0.00) respectively. Eicher Motor resulted a Lowest but insignificant values (t= 2.11, p = 0.07).   Originality/Outcome: The study found that positive impact of capital budgeting on profitability of the firms under the study.