Page 61 - IMDR MSME BOOK 2021

Managing Finance in Micro, Small & Medium Enterprises
awareness among the entrepreneur about the nancial
tools and technical terminology, but these decisions are
being taken based on their experiences.
Those respondents who have reported that they are
using capital budgeting techniques for taking the long-
term investment decisions they further shared the
frequency of using the particular type of technique
(Figure No. 11). It is found (Table No.7) that 61%
respondent rms always use Pay Back period method,
29% use NPV method , 24% use IRR and 12% use ARR.
It implies that majority of the respondents always use
discounted cash ow method for taking capital
expenditure decisions. It is found that 22% respondent
rms sometimes use Pay Back period method, 40% use
NPV method , 26% use IRR and 26% use ARR. Even those
who use capital budgeting techniques sometimes there
is majority of respondents who are using DCF methods.
There are respondents who use capital budgeting
techniques said that they rarely use pay back method
(10%), NPV (22%), IRR (38%) and ARR (51%). The 7%
respondents have no idea about Payback method, 9%
NPV, 12% IRR and 11% ARR, respectively. It has been
observed that 7-11% of the respondent rms may not
have idea about the nancial terminology for the criteria
which they might have been following for taking
investment decision.
Table No. 7 - Use of Capital budgeting Technique