Investment decision, popularly known as capital budgeting decision, is one of the most important decisions that finance managers have to take. In the current era of globalization and competition, selection of profitable investment opportunities is a must for the survival of any company. A number of studies have shown that companies employ several capital budgeting techniques while selecting a project. Based on a primary survey, the present study examines the current status of capital budgeting and explores the techniques preferred by Punjab-based companies. The study also seeks to find whether the factors such as size of capital budget, age of the company and nature of industry have any influence on the choice of capital budgeting methods. As it is found that most of the companies pursue non-discounted methods, the study suggests that they adopt techniques like Net Present Value (NPV) and Internal Rate of Return (IRR), which could deliver better results.

Capital budgeting is considered to be one of the most important activities since decisions related to capital budgeting have long-term implications for a firm. It is the process of making decisions on capital expenditure, which is incurred at one point of time whereas their benefits are realized at different points of time in future. There are several capital budgeting techniques developed to select the best project. Some techniques are non-discounted methods such as Pay Back Period (PBP) and Accounting Rate of Return (ARR), whereas a few of them are discounted methods like Net Present Value (NPV) and Internal Rate of Return (IRR).