Abstract of the Article

Article: Capital Budgeting Practices of Twelve Large Manufacturers
Marc Ross, University of Michigan, mhross@umich.edu

Abstract of the Article: Rose Case

1. Purpose of the Article:
2. The study is aimed at examining the capital budgeting practices by using empirically determined hurdle rates.
3. The study examines the usefulness of capital budgeting practices of larger organization at small and large project budgeting.
4. Scope of the Article:
5. The findings of the article are helpful in case of budgeting practices for small as well larg projects.
6. The findings of the article may not be generalized as the sample is taken from a smaller number of organizations.
7. Classification of the Article:
8. Empirical study
9. Findings or Inferences of the Article:
10. The study indicate that different firms, project budget approval follow diverse criterion.
11. Only large projects are observed to face a hurdle rate close to the cost of capital.

• The results of the study suggest that it is important to investigate how capital budgeting is different at different levels of an organization i.e. CEO, division, investment committee level and board levels.

1. The capital budgeting practices in case of smaller projects at a large organization can be used as an indication of that organization’s effective use of skill and information from the subordinate levels.