Proposing a bi-objective model for capital budgeting management under possibility uncertainty: an accrual accounting approach

Karimi, Saeed; Mohammadi Dolat-Abadi, Hossein

doi:10.22059/ijms.2026.370827.676473

Proposing a bi-objective model for capital budgeting management under possibility uncertainty: an accrual accounting approach

Articles in Press

Document Type : Research Paper

Authors

Saeed karimi ¹

Hossein Mohammadi Dolat-Abadi ²

¹ PhD of industrial engineering, Department of Industrial Engineering, Iran University of Science and Technology, Iran,

² Assistant Professor, Department of Industrial Engineering, College of Farabi, University of Tehran

10.22059/ijms.2026.370827.676473

Abstract

Despite the significant influence of both long-term and short-term financial objectives on real-world capital budgeting decisions, their simultaneous integration into optimization models has received limited attention in the literature. In this regard, a multi-objective model is proposed to maximize shareholders’ equity while minimizing violations of predefined financial ratio goals. The research introduces an accrual accounting system that distinguishes between liquidity flows and profit-and-loss accounts, incorporates the short-term interests of shareholders and the board of directors, and considers project financing from various sources at different interest rates. To investigate the business parameter uncertainty, multiple scenarios are considered, while a robust possibilistic approach is developed to solve the model. Moreover, a Pareto-optimal solution is proposed to analyze trade-offs among objectives and decision variables. Additionally, a sensitivity analysis of the conservatism level is conducted, and a comparison between accrual- and cash-basis accounting is provided to help decision-makers gain managerial insights. The findings reveal that greater conservatism reduces shareholders’ equity under both the accrual and cash bases of accounting.

Keywords

Capital budgeting management

Accrual accounting

Financial ratios

Stochastic optimization

Goal programming

Subjects