The invesment appraisal practice of UK retailers

Abstract

Financial control by retail companies has been little studied, in spite of its prima facie importance. This paper reports the results of a survey of the capital budgeting practices of UK retailers, focusing in particular upon the financial techniques used to appraise proposed investment projects, No previous surveys have concentrated upon retailing, but, where disaggregated results have been reported, there has been a suggestion that retailing has lagged behind other sectors in its use of relatively sophisticated appraisal techniques that take into account the time value of money. The findings of this survey sugges, however, that retailing is now similar to other sectors, with both the sophisticated iscounted cas flow techniques and the ‘naive’ payback being popular. A number of possible explanations, including economic recession, for developments among retailers are discussed.

Keywords:

• Financial control
• Invesment appraisal
• Capital budgeting
• Discounted cash flow.