Abstract

The study aims to identify the extent to which discounted cash flow methods are used when making investment decisions and their impact on cost rationalization in Jordanian Industrial Public Shareholding Companies. In addition, to explain the obstacles that may limit the use of these methods. The study population was composed of the Jordanian Industrial Public Shareholding Companies listed in Amman Stock Exchange (ASE) in the biginning of 2020, The study’s random sample of these companies was selected including (39) companies, i.e. (54.9%) of the total companies listed in Amman Stock Exchange (ASE) were (71) companies. Five questionnaires were distributed to each company for its employees, including financial managers, their deputies, assistants, and heads of accounting departments and employees in those departments. The questionnaires were distributed and retrieved by hand. Thus, the number of distributed questionnaires was (195), of which (178) questionnaires were retrieved, and three questionnaires were excluded because of the incomplete responses. Thus, the number of questionnaires approved for the purposes of analysis and research reached (175), i.e. (89.7%) of the total distributed questionnaires. The study concluded several results, and the most important results were the following: it found that the use of discounted cash flow methods was high. There was an uneven use of evaluation methods for investment proposals that based on discounted cash flows as the greater use was of the NPV methods, the use of reduced cash flows methods affected significantly on the cost rationalization and cost reduction, there were some constraints that can limit the use of discounted cash flow methods in Jordanian Industrial Public Shareholding Companies, although these constraints were of low, not significant impact. Based on the study results, the researchers presented a number of recommendations, including: The diversification of discounted cash flow methods and a lack of focus on the net present value method because each method has advantages and positives that distinguish it from others, enhancing the awareness of those people who are in charge of the Jordanian Industrial Public Shareholding Companies about the implications of using discounted cash flow methods to rationalize and reduce costs, to work on addressing the obstacles that may limit the use of discounted cash flow methods in Jordanian Industrial Public Shareholding Companies, although they are not substantial.