Business and Investment Business and investment



Introduction

Investment decisions are major financial decisions, all decisions relating to business investment derives from the analysis of investment like investment in working capital such as cash, banks, accounts receivable, inventories and investments represented capital in fixed assets such as buildings, land, machinery, technology , imports , foreign direct investments etc.

To make the right decisions financier must take into account the elements of assessment and analysis as the definition of criteria for analysis, i.e. cash flows related to investments, investment risk and required rate of return (Kotabe, 1999).

Definition of criteria for investment analysis

In most such organizations or private companies, financial decisions are focused or have a clear objective, "the maximization of wealth" through profits, this in the current conditions, should refocus on what constitutes a "maximizing wealth "and the creation of" business value.”

Talking about import the criteria for analyzing investments are made on result of benefits and costs of an investment proposal, these benefits and costs in most cases do not occur instantly, but can be generated by shorter or longer periods (Nelson, 2000).

To find the costs and benefits it should clearly define the criteria to be used for evaluation against the investment proposal. Among the criteria that have achieved a high degree of technical acceptance on the part of financiers, are those who consider the concept of time value of money, making treatment flows discounted costs and benefits. We can mention among them the net present value, Rate of Return, The Benefit-Cost and Internal Rate of Return, which provide the necessary information for investment analysis.

Business and investment

Investment risk

The future is uncertain, everything that happens around us can change from one moment to another, which is why when making an investment decision must take into account the risk factor (Taylor, 2004).

The risk of an investment is measured by the variability of possible returns around the mean or expected value of the same, ie, the risk is given by the deviation of the probability function of potential returns.

Currency risk: Definitions and Effects

The objective of this part is to define the concepts related to currency risk and how it affects the company. We look particularly at whether the exchange rate risk affects the value of the company or not. 

Before discussing the effects, it is necessary to define the currency risk, businesses carry out transactions with foreign countries are sometimes subject to special risks related to foreign currencies, where there is a delay between the billing of an operation and its monetary settlement, to properly manage this risk it must be defined including the phenomena that give birth to it (Lane, 2007).

A Concept of currency risk

Definition 

Currency risk can be defined as the risk of capital loss associated with future changes in the exchange rate and is greatly increased with the floatation of currencies and the development of international trade.

Financial transactions

Some authors limit the notion of currency risk "for any losses that may affect the result of changes in exchange rates or exchange rates of foreign currency ...