CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The term ‘Capital Budgeting’ occupies or plays a strategic or pivotal role in every organization, be it public owned organizations or privately owned organization. To this extent, the importance or role of capital budgeting cannot be undermined because of its importance in financial decision. Capital Budgeting has been defined in different ways but it means of the same or relatively the same by different authors, scholars and schools of thought. According to the Institute of Cost and Management Accounting, Capital Budgeting as a financial and quantitative statement prepared on capital expenditure prior to a definite period of time of the policy to be pursued for the purpose of attaining a given objective. In the word of G.C Philipalys ‘Capital Budgeting’ is concerned with allocation of firm’s care financial resources among the available market opportunities. In his own view, Lynch explained that Capital Budget-ing consists in planning, development of available capital for the purchase of maximizing the long term profitability in the concern. In general view, Capital Budgeting involves all the processes in the investment of resources in the long term projects in anticipation of making profit or providing essential services to the public acquisition of land, building, machinery and other capital projects. More often than none, the resources of a nation or society are not allocated to its component by the market forces or mechanisms (prices) but by the public decision making means. The principles that guide the allocation of the public resources ensure the resources are distributed in such a way that the objectives of the public are accomplished through efficient and effective budgeting system.
1.2 STATEMENT OF THE PROBLEM
This research work will focus primarily on investigating and point-out the problems facing public owned organizations for its inability to put in place efficient allocation of resources, equitable distribution of income by the use of tax and stabilization of economy by the use of capital budgeting and how it affects their service delivery to the people, high lost an inadequate capital, poor human resources, unpredictable social and economic factors bad policy formulation, sharp practices.
1.3 SIGNIFICANCE OF THE STUDY
This research study will endeavor to show how Public Sector can go about putting its Capital Budgeting in place to bring desired results to the people. Also, to contribute to the body of knowledge which will be beneficial to the society at large.