Define investing decision in brief
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Yogita Ingle 4 years, 11 months ago
Investment decision relates to decisions about how the firm‘s funds are invested in different assets that is, different investment proposals
Has two components:
• Working Capital Decisions – Short Term investment decisions.
• Capital Budgeting decisions – Long Term investment decisions
Factors affecting Investment Decisions/Capital Budgeting decisions
1. Cash flows of the project: The series of cash receipts and payments over the life of an investment proposal should be considered and analyzed for selecting the best proposal.
2. Rate of Return: The expected returns from each proposal and risk involved in them should be taken into account to select the best proposal.
3. Investment Criteria Involved: The various investment proposals are evaluated on the basis of capital budgeting techniques. These involve calculation regarding investment amount, interest rate, cash flows, rate of return etc.
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