An Integrated Framework for Capital Budgeting Decisions: A Theoretical Perspective on Managerial Accounting and Strategic Business Implications
DOI:
https://doi.org/10.59645/abr.v18i1.762Keywords:
Capital Budgeting Decisions, Accounting Implications, Business Implications, Investment Appraisal Methods, Investment Decision-MakingAbstract
Initial start-up capital is required for becoming a business owner; nonetheless, capital alone is not a sufficient determinant of business success. To adequately gauge success, businesses must be established on the principle of going concern and use a well-balanced capital budgeting strategy. This study introduces an integrated approach to capital budgeting that considers both qualitative and quantitative parameters, addressing limitations of current models that rely heavily on financial metrics. Drawing on contingency theory, capital budgeting theory, feasibility study methods, and the PESTEL framework, the study integrates these variables into a central framework through a conceptual synthesis of the literature. Ten essential factors affecting investment decisions are identified in the model, including financial, legal, operational, political, scheduling/time, social, technical, economic, ecological/environmental, and market feasibility. These factors are evaluated in terms of their influence on project viability and external conditions, producing a more thorough evaluation methodology. Within this framework, the PESTEL environment and feasibility considerations create a strategic “upper-tier decision” that guides governance-level approval and secures investment strategy. The outcome of using the model is an overall assessment by organizations of capital budgeting projects, leading to more robust and contextually relevant decisions.
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