Role of Cost-Benefit Analysis in Decision-Making for SMEs in Okene LGA
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Background of the Study
Cost-benefit analysis (CBA) is an essential tool for decision-making, particularly for small and medium-sized enterprises (SMEs). It involves comparing the costs of a project or decision with its expected benefits to determine its feasibility and financial viability. In Okene LGA, where many SMEs contribute to local economic development, the application of cost-benefit analysis can help entrepreneurs make informed decisions about investments, operations, and expansions. Despite its potential, the extent to which SMEs in Okene LGA utilize cost-benefit analysis remains unclear. This study aims to evaluate how cost-benefit analysis impacts decision-making and profitability in SMEs within the region.
Statement of the Problem
Many SMEs in Okene LGA face challenges in making effective business decisions due to limited access to financial tools and expertise. Without the proper application of cost-benefit analysis, these businesses may overlook critical factors that affect their profitability and long-term sustainability. This study seeks to understand the role of CBA in improving decision-making processes for SMEs in Okene LGA.
Aim and Objectives of the Study
Aim: To assess the role of cost-benefit analysis in decision-making for SMEs in Okene LGA.
Objectives:
- To examine how SMEs in Okene LGA currently apply cost-benefit analysis in their decision-making processes.
- To evaluate the impact of CBA on the profitability and financial success of SMEs.
- To identify the challenges SMEs face in implementing cost-benefit analysis.
Research Questions
- How do SMEs in Okene LGA apply cost-benefit analysis in decision-making?
- What impact does cost-benefit analysis have on the profitability of SMEs in Okene LGA?
- What challenges hinder the use of cost-benefit analysis in decision-making for SMEs in Okene LGA?
Research Hypothesis
- H₀: Cost-benefit analysis does not significantly influence decision-making in SMEs in Okene LGA.
- H₀: There is no significant relationship between cost-benefit analysis and profitability in SMEs in Okene LGA.
- H₀: Challenges in implementing cost-benefit analysis do not significantly affect decision-making in SMEs.
Significance of the Study
The findings will provide valuable insights into how SMEs in Okene LGA can improve their decision-making processes through cost-benefit analysis, ultimately leading to better financial outcomes and business sustainability.
Scope and Limitation of the Study
The study will focus on SMEs in Okene LGA, with data collected from business owners and managers. Limitations may include difficulty accessing comprehensive financial records and the willingness of SMEs to share detailed information.
Definition of Terms
- Cost-Benefit Analysis (CBA): A financial tool used to compare the costs and benefits of a decision or project to assess its feasibility and profitability.
- SMEs (Small and Medium-Sized Enterprises): Businesses with a limited number of employees and a specific annual revenue threshold, typically characterized by less capital and smaller-scale operations.
- Profitability: The ability of a business to generate a profit relative to its expenses.
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