Capital budgeting under certainty, uncertainty and risk conditions: An application on the Turkish banking sector

Businesses usually use various investment opportunities for their funds accumulated from various sources and also make activities to find investment opportunities that maximize their business value. Capital budgeting refer to long term asset investments and therefore have the highest importance, the lowest ROI rate and liquidity. Therefore they are investments posing the highest risk for businesses. This study examines the investment made in fixed assets in order to reach a certain level of production. Economic crises, cyclical conditions or seasonal impact have a very important impact on the investment decisions of businesses today. The level of activity of the economy around this general trend push businesses to define the risks and develop policies accordingly.In this thesis the relation of the amount of fixed asset investment and liquidity of banks listed on Istanbul Stock Exchange and their profitability will be examined under the certainty, uncertainty and risk conditions. In order to reach this goal relevant data were collected with rate analyses and risk analyses using bank balance sheets and income tables.The thesis is composed of three parts. In the first part of the thesis the capital budget is examined from a technical point of view and in the second part the certainty, uncertainty and risk concepts were examined. In the last part liquidity, profitability and capital rates of the banking sector in Istanbul Stock Exchange were calculated and risk analyses were carried out. At the results and suggestions part of this thesis it has been seen that capital budgeting analyses is of critical importance for the banking sector, the rate of profit of finance companies have a positive impact on their enlargement and that companies that have a higher capital than assets have a higher profitability during this period.Keywords: Capital Budgeting, Risk Analyses Methods, Certainty, Uncertainty, Risk, Capital Structure, Capital Cost, Net Present Value Method.