The prime aim of this research is to present evidence on the current small scale entrepreneur’s investment practices and to determine how far these practices reflect the latest financial theories. We submit that this study within surveys on capital budgeting because of its breadth, in the sense that it is a comprehensive survey that examines in detail various aspects of small corporate investment practices. The research considers a number of strategic investment issues that have received little attention in previous Indian investigations of capital budgeting practices. This study investigated the extent to which capital budgeting techniques and procedures are employed by small entrepreneur of Delhi work in this area has been focusing on corporate firms, paying little attention to non- profit organizations. The study design adopted is the survey design. The study focuses on primary data as well as secondary data. Primary data were obtained from employees of individual firms using self-designed questionnaire, while secondary data were obtained from financial reports of the same firms. Data were analysed using computer software. The findings in this study indicate that the initial stages of capital budgeting process are being followed in firms, but minimal implementation follows. The high rate of change in the economy and business practices, and the developments in the academic literature, have led to the need to re-examine the extent to which the newer theoretical developments have affected Indian corporate capital budgeting practice The Indian business environment today has become highly turbulent with companies being exposed to a multitude of risks such as business cycle risk, slowdown in demand, unanticipated actions of competitors, interest rate risk, inflation rate risk, unexpected technological developments, government policy changes, and above all, exchange rate risks. As per RBI report (2013–14), the Indian economy is facing serious challenges emanating from a sinking rupee, stagnating economic growth (low GDP), depleting forex reserves, decreasing foreign institutional investments (FIIs), mounting inflation, and a high fiscal and current account deficit (https://www.rbi.org.in/scripts/AnnualReportPublication). This economic slowdown and demand destruction have led to companies facing dwindling profitability, shrinking market capitalization and escalating debts which have made the investment scenario even more risky. Only globally competitive and professionally managed companies can be expected to thrive in such an unstable environment. Amidst a weak Indian economy, where companies are struggling with sales slowdown, sound financial management practices and effective investment decision making are the only keys to the survival and long-term success of these companies. This is supported by: - proportion of participants who showed that they normally divert funds, presence of stalled and idle projects in firms and an indication that modern appraisal techniques of capital budgeting are not highly applied. A number of capital budgeting techniques find place in basic as well as advanced text books on Financial Management and Corporate Finance. Each technique has its pros and cons as a decision making tool. The research paper investigates the decision making practices of small scale entrepreneur with respect to Capital BUDGETING TECHNIQUES employed. The paper also examines the linkage between the techniques employed and various factors such as; size of investment outlay, nature of investment, firms size, and growth rate and capital structure. Also probed is the extent of delegation of decision making authority in respect of capital budgeting decisions. Further, the respondents’ views on relative popularity/significance of the techniques and reasons for the same have also been studied. Furthermore, the differences in techniques and decision making practices of small scale entrepreneurs and popular companies operating in India have also been looked. The information/data for the above stated purpose was collected through a secondary data from some companies. The main findings extracted from the responses to the questionnaire are, that key decision makers of small scale entrepreneurs are quite aware of and practically using sophisticated capital budgeting techniques. The study shows that bigger size companies give greater preference to IRR, while small scale entrepreneurs rely more on NPV. Also small scale entrepreneurs are keener in estimating the payback period (PP) as compared to larger companies. Consciously or unconsciously the small scale entrepreneurs relying more on debt financing or with high growth rates give more preference to the NPV technique, while low leverage and low growth colleges rely more on IRR. Small scale entrepreneur account for big percentage of Indian jobs and yet most of the studies on capital budgeting techniques have been focused on large firms. A mistake in their capital budgeting process could lead to disastrous consequences as they do not have the financial clout to recover from them. The purpose of the paper is to investigate where small scale entrepreneurs stand in regard to the use of capital budgeting techniques and risk analysis.
