FINANCE

Making Capital Investment Decisions in Business



Making Capital Investment Decisions in Business

Introduction To The Topic

The business environment today is highly competitive as well as rapidly developing, due to which the businesses require to make appropriate decisions that can lead them towards competitive edge and success in the market. In order to grow and sustain, businesses invest into new projects that can result in providing them the sustainability and maintenance required for their strategic position in the competitive market. Therefore, the organizations consistently adopt strategic planning approach for long-term goals with clear direction towards profitability and success. One of the most significant area involved in strategic planning of business is strategic decision making by the management regarding the investments they make, which includes managing available funds by selecting the right investment project by implying the strategic analysis approach as well as taking into account the relevancy or consistency of the selected alternative with the objectives of the company as well as the level of acceptance by shareholders (Röhrich, 2007, p.2-3).

Financial managers evaluate the available alternatives by deeply analyzing the related aspects such as expected cash flows of future periods, size of the funds needed for a project, life time of the project, and the degree of risk attributed to the project; in order to select the best investment alternative. Thus, making capital investment decision in business is really crucial and vital, which involve the assessment of investments and choosing the best one. According to Deryl Northcott, capital investment asks for making; communicating; as well as accepting the decisions regarding investment in a long-run, risky capital assets (1992, p.2). Hence, today's increasingly competitive businesses as well as requirement of rapid developments clearly ask for effective costs controls while keeping the returns higher as well as minimizing the risks, where, this is highly associated with the capital investment decisions the firm makes. Thus, this paper is focused on the concept and techniques of making capital investment decisions in the business.

Introduction To The Purpose & Ethical Considerations

The purpose of this report is to clearly understand the concept of capital investment in a business, which involves the understanding of the immense importance it holds and the techniques it involves. Businesses give great significance to capital investment decisions and therefore use different techniques it offers for making the best decision that will result in success for the firm. Therefore, this report will be helpful for the businesses or individuals for knowing the best technique they can use to evaluate the investment projects and thereby choose the best investment.

The ethical considerations involve in this academic report incorporates integrity, accountability, as well as responsibility for conducting academic study while keeping the widely recognized academic research standards. The ethical consideration of integrity is taken into account while preparing this report, i.e. this academic study follows elevated standards of research including trust, honesty, fairness, responsibility, and respect. However, there is certain level of ethical constraints involve here, i.e. the conclusion and justifications stated are based on the secondary ...