An Evaluation of The Effects Of Hyperinflation on Capital Budgeting: A Case Study of National Foods Holdings Ltd (NFHL)

Abstract

This study was motivated by Zimbabwe’s unstable economic environment because of hyperinflation and the effects that it has had and is still having on the economic sector’s operations, specifically the manufacturing sector. The purpose of the study was to identify the capital budgeting techniques that are most effective in a hyperinflationary environment. The study adopted a mixed research methodology. The sample size for the research was 34 staff members at NFHL from the finance and accounting department and probability sampling was used. Questionnaires and interviews were used as the research instruments. According to the financial data analysed for the prior financial periods, the company has a strong liquidity and strong profitability but however, knowledge of the macroenvironment is not being adequately put at the disposal of the employees at the entity. The researchers recommends that the finance staff at HNFHL must have in-depth knowledge of the basic elements in capital budgeting and establish a well-defined feedback system to ensure the effectiveness of capital budgeting system in a hyperinflationary environment.

Keywords

• hyperinflation
• capital budgeting
• finance
• manufacturing sector