Capital Budgeting and Capital Structure Decisions in Saudi Arabia

This era of intense competition, escalating cost, scarce resources accompanied with stringent reimbursements has made the importance of evaluation of project much more than the past. This research addresses this area by investigating capital budgeting techniques and capital structure decision in companies in Saudi Arabia. A survey was adapted to analyze the choice/decision making for capital structure and capital budgeting. Data was collected from 10 companies and contained 7 questions. Study provides a deep insight to look at the differences between theory and practice. Size of the firm and its effect on such decision making was very important for taking these decisions as evident by this study. Also it enables us to determine the main CFOs objective in setting debt policy in order to minimize the firm's weighted average cost of capital hence preserving financial flexibility.