TECHNIQUES FOR ASSESSING DURABILITY OF SMALL SCALE BUSINESS OPPORTUNITIES IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1. Background of the study

Probably amongst the most crucial decision facing management today are those concerned with capital investment. Typical of these decisions are those related to expansion through adding of new product lines, factory extension for extension in new sales entries. The significance of a decision of this nature is obvious since based on the decision made, the firm will find itself, committed to a pattern of activity and expenditure that will continue for some time into the future due to huge capital outlay involved.

Uncertainty with respect to the future is considered in any investments decision but the further into the future its efforts are projected, the greater the degree of that uncertainty.

Management appraisal involves the generations of investment proposals, the estimate of cash flow for the proposal, the evaluation of cash flow, the selection of project based upon an acceptance criteria and the continuance re-evaluation of investment project after their acceptance (Home et al 1983).

How high a proposal must go before it is finally approve depends upon how large the capital outlay is the greater the capital outlay, the greater the number of evaluations that may be the required. The object of any system of project evaluation is to be able to compare the profitability of a series of funds usage. Each project will require the use of volume of the firms fund for varying periods and will also provide for the returns of those funds together with an element of profit. The appraisal system should be able to take both of these factors and by comparing them, calculate a comparable rate of return.

This will enable investment projects to be measured against two criteria.

 1.      To ensure that only those projects that give the highest rate of return are selected.

 2.      To ensure that investments are not made in projects that will give a rate of return less than the cost of capital employed in the business.

It is in this regard that this essay seeks to analyze the role of investment appraisal of small business in Nigeria. This essay will also seek to evaluate and carryout an investment appraisal of small business in Nigeria.

1.2. OBJECTIVE OF THE ESSAY

 -        To determine investment appraisal of small business in Nigeria?

 -        To determine the nature or outlook of investment appraisal of small business in Nigeria takes in business projects?

 -        To determine how investment appraisal of small business in Nigeria is of benefit to both prospective investors and the country in general? Also does in-accurate methods of assessment lead to the selection of projects which yield unduly low returns?

1.3   SIGNIFICANCE OF THE ESSAY

 This essay work will be beneficial to the government because efficiency in small business operation will be achieved with high profit thereby entailing more income available for taxation.

Small business operation will enjoy the advantages of new accurate determination of the state of affairs of their organizations. The research work will broaden the idea and knowledge of the entire developing countries of the usefulness by examining impartial views about the methods and making generation based upon through view of all relevant issues thereby clearing point of doubts earlier conceived.

Besides, the researcher hopes that the answers obtained will add an insight to the problems of investment appraising of small scale business in the country and will also serve as a good stepping stone for subsequent researchers in this field of study.

1.4   SCOPE OF THE ESSAY

 The focus of the essay will primarily be on the investment appraisal of small business in Nigeria and also in the course of study. There shall be an appraisal of some sources of investment fund of small business undertakings.

Furthermore, this piece of work will want to bare the methods of investment appraisal and in promoting small-scale enterprises in Nigeria.

1.5. RESEARCH QUESTIONS

-      what is  investment appraisal of small business in Nigeria?

 -     what is the nature or outlook of investment appraisal of small business in Nigeria ?

 -      How do investment appraisal of small business in Nigeria is of benefit to both prospective investors and the country in general? Also does in-accurate methods of assessment lead to the selection of projects which yield unduly low returns?

1.6. RESEARCH HYPOTHESIS

H0: SME business opportunities in Nigeria are not durable

H1: SME business opportunities in Nigeria are durable

1.7.   LIMITATIONS OF THE ESSAY

 The subject of investment appraisal of small business has not yet enjoy tremendous boost in this country. It is on this premises that we lack books for our literature review and what is more, the few ones we got are written by foreign authors whose tax system differs from that of our economy. Also the lack of time is one of the limitation factors.