Techniques Of Capital Budgeting

Technique of Capital Budgeting is the method that wealth is set aside so that it can be properly managed, planned and put into effective use to generate more income.

Capital Budgeting is not only about money but also managing everything you need to put into effective use to make more income. Money does not guarantee the success of a business.


Techniques Of Capital Budgeting

Immediately I saw this topic, I was just smiling because it is a full standard in accounting that can't be exhausted in the space of one hour.

Let us start by first breaking that sentence in a bit. There are three words, there are Techniques, Capital and Budgeting.

We would start by defining those concepts and merging them together. If we can understand that concept well then I sincerely think that my job is well done here.

What is the Technique?

Technique means Method or pattern

Technique means this is a way of carrying out a particular task.

It can also be said to be an efficient way of doing or achieving something.

Technique is also a particular pattern of doing an activity, which involves practical skills

I must also state it clearly here that TECHNIQUE IS DIFFERENT FROM SKILLS


Techniques basically has to do with Methods, Styles, pattern, etc while Skills have to do with the ability to perform a task.

Kindly take note of the above


Capital is the simplest way is said to be assets that enhance one's power to perform economically useful work.

Capital is also the ability to explore the available resources and techniques to achieve a desirable expected result.

Capital is wealth in the form of money or assets owned by an individual or organization that is presently available for the purpose of starting a business or investment


This is an estimate of income and expenditure for a period. This is a financial plan for a defined period of often one year. Therefore, if we are to merge the three concepts together we would come to this definition.

Wealth is set the method aside so that it can be properly managed, planned and put into effective use to generate more income.

I deliberately want to make it simplified, so that even the science students in our midst will not be lost.

In time past, we have 2 basic methods of Capital Budgeting and they are

The traditional methods and modern methods

Technique of Capital Budgeting is the method that wealth is set aside so that it can be properly managed, planned and put into effective use to generate more income.

Under the traditional methods, we have a Payback period and Average rate of return which is also known as the discounts payback period.

Under the modern time, we have Net Present Value, Internal Rate of Return, Modified Internal Rate of Return and Profitability Index

But I will not be talking about all those beautiful accounting jargon. Rather I will simplify the topic to be

What are the methods I can use to save in order to generate a long-term investment programme.

For those of us working and those who want to start something new then let us look at some things

I am sure that finding your interest and developing your passion has been discussed more than once on this platform.

So  I will just concentrate on how we can achieve those dreams financially

There is an adage that our people say that we don’t test the depth of a river with both feet. Once you have discovered your passion, and what you want to do, you will now need to calm down and count your cost very well. How much do you need in total to start your business?

Many people are of the opinion that you don't wait till you have all the money before you start a business. Well as much as I would love to agree with you, the truth is that I don’t agree.

Many businesses are in shambles today because they didn’t plan well financially. At least get about 85% of what you need before you start. I also agree that you don’t start a business on loan

Please take note that we have various types of currency. Let me list some for us

  • Integrity
  • Responsibility
  • Loyalty
  • Diligent
  • Friendliness
  • Relationship
  • Finances

Now please take note that finances that represent money is that last thing I wrote.

Now all these you should have before starting your business. That's all you need, That should be your capital budget.

You should move with people that buy into your dream. You should be able to have the following.

One of the major reasons why I don’t have issues with sales is because of the currency that I have deliberately structured myself to build.

Now tell trusted people about what you want to do. Please don't tell dream killers about it.

Ensure you also have someone who has done what you are about to do and take time to learn from the mistakes of that person. Never rush into any business no matter how creative it might seem at the start.

Let me quickly share the story of a friend of mine. She is an accountant and because of the situation of the country, she decided to go into photography.

I discovered that many people I know use about just 6 months into the apprenticeship and they are on their own I noticed that she has used about 2 years

I asked her why her learning period was taking so long. She gave me a reply that got me thinking for days.

She said she went to the university to study a four-year course that she is not using as a source of income.

She said that the future of photography in Nigeria is very bright and she hopes to be among the top ten in the nearest future. So she wants to use another 4 years to learn not only the photographic aspect of it but how to beat the best and be the best for a lifetime.

She is spending the currency of Learning in terms of time. That's her capital budget

I am sure that many people are surprised by the way the teaching is going on. As much as money plays a very important role, it simply does not guarantee the success of a business.

Capital Budgeting is not only about money but also managing everything you need to put into effective use to make more income. Money does not guarantee the success of a business.

Then why are people who have beautiful ideas cannot start it because they do not have the money?

It is because they have focused too much on the minor (which is money) and lose focus on the major (which is among the points I listed before money)

Now Tolulope Makinde knows how busy my schedule is. Immediately he said I was going to something today I said no problem. I am sure you all know that he is not paying me.

In fact, most people have to go through my husband who is my manager before I honour any teaching but not Tolulope Makinde

Why? He has the right currency and he his spending it well

There was a time he gave me books to sell for him I was not able to sell those books he just called me to buy the books instead. I bought them to give it to someone.

Why would I do that when I am not even a millionaire yet. It is because he has the right currency and he his spending it wisely.


You said taking a loan is not advisable by you to start a business... Most successful business today started by loan... Why don’t you think that taking a loan is a bold step to starting a business?

Assuming I have 100k to invest, which business will you advise me to dive into as you see this Nigeria to startup?


I love this intelligent question. Those successful businesses today were on loan. Yes, I agree, but what was the situation of the country when those loans were collected?

The percentage was so low that taking a loan became the tune of the day. It is no longer so today. The level of competition then was also almost not In existence, but now the competition from your competitors can kill your business.

Another thing is that those companies have a monopoly on the market. They were the price givers but now most companies are price takers. They were so many economic factors that were encouraging then that is not encouraging now.

So the question I would now like to answer is that, why shouldn't I get a loan to start my business?

The reasons are

1) Remember that the business is a prediction that can be positive or negative. You need maximum concentration. You should be thinking about the success of your business and be thinking about how to pay back the loan.

2) You cannot quantify how successful you are in your business until all loan has been paid, therefore you are working like an elephant and eating like an ant.

3) You put yourself under unnecessary pressure because you just have debts to pay, and many more.

Someone who wants to start dry cleaning should at least have a washing machine, Industrial Iron and recommended soaps to wash before he starts.

He might not have buckets as those ones can be borrowed from neighbours at the beginning.

I think it is highly unwise to desire to buy a car and you start with the tires. That's my thought

Question 2:

Please, with your wide experience what do you see that will be excelling more in the market for the next 3-5year's time on basic investment?


But I can't give you any idea about any business because I don’t know you personally.

Why is my answer like that?

The process of knowing you would give me the idea of what your strengths and weakness are and by that, I can advise you on what you can use 100k to do effectively and trust me on this you will generate increases.

....but to answer generally, of you have 100k is to maximally put into use all that has been discussed on this platform

* Discover your passion

* Differentiate your ambition from your career

* Know your place of strength and your place of interest and so on.

*We need to make research on recycling. This will generate a lot of massive wealth for the youths.

We are a consuming nation and not a producing nation. Do you know that about 98% of what we use are synthetic and nylon in nature?

We need to make research on how those wastes can be converted to wealth for us. The waste in China is used to make shoes and shirts. The waste from poultry is used to make plastics and buckets.  The waste from plastic and bucket us used to make slippers.  The waste from slippers is used to make low-density materials and it keeps going on and on

For those who don't like the path of entrepreneurs they can only save by investing In treasury bills, but the percentage giving as at last month also dropped.

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