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What is the the importance of capital investment decisions in a business?
Wiki User
∙ 14y ago
The following motives will clearly explain why capital budgeting is very important for a firm:
1. Expansion: Capital budgeting is directed towards expansion of the level of operations. It is done through acquisition of fixed assets by purchasing property and plant facilities, which in turn ensure a proper investment and balancing in investment.
2. Replacement: After maturity period when firm's growth slows down, it is required to replace or renew some outdated or worn-out assets, i.e. machinery, equipment, vehicles, etc. Thus a firm can return into its full-fledged production and generate desired benefits.
3. Renewal: As an alternative to replacement, renewal may involve rebuilding, overhauling or retrofitting an existing asset. It certainly increases the productions and profits of a firm.
4. Other importance: There are certain other importances of capital expenditure, which include -
a) Plan for securing funds
b) Retain a competitive position in the market
c) Sales and cash forecast
d) Sales guarantee
e) Comparative study of alternative projects and launching new products
f) Outlays for advertising, research and development, management consulting, etc.
Wiki User
∙ 14y ago
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How are capital investment decisions made?
Capital investment decisions are made by a group of executives in a business firm. These decisions are crucial to the longevity of not only the business but also the future stockholders of that company. http://www.finweb.com/investing/capital-investment-management-how-are-key-decisions-made.html
Capital budgeting techniques in Indian industries.?
Capital budgeting techniques in Indian industries include researching long term investment decisions and making business decisions based on predictions. Evaluations are made and changes can be implemented if an Indian industries need them. .
What are the basic financial decision in an organization?
The basic financial decisions include long term investment decisions, financing decisions and dividend decisions. Investment Decision relates to the selection of assets in which funds will be invested by a firm. These decisions are of two types Capital Budgeting Decisions and Working Capital Decisions. Financing Decision is broadly concerned with the asset-mix or the composition of the assets of a firm. The concern of the financing decision is with the financing-mix or capital structure or leverage. Dividend Policy Decision isrelated to the dividend policy.
What is the effect on IRR if cost of capital decreased?
A change in the cost of capital will not, typically, impact on the IRR. IRR is measure of the annualised effective interest rate, or discount rate, required for the net present values of a stream of cash flows to equal zero. The IRR will not be affected by the cost of capital; instead you should compare the IRR to the cost of capital when making investment decisions. If the IRR is higher than the cost of capital the project/investment should be viable (i.e. should have a positive net present value - NPV). If the IRR is lower than the cost of capital it should not be undertaken. So, whilst a higher cost of capital will not change the IRR it will lead to fewer investment decisions being acceptable when using IRR as the method of assessing those investment decisions.
What is the Importance of investors in a firm?
Investors provides the funds (business capital) which the company uses to operate. With no investors there is no business.
How are capital investment decisions made?
Capital investment decisions are made by a group of executives in a business firm. These decisions are crucial to the longevity of not only the business but also the future stockholders of that company. http://www.finweb.com/investing/capital-investment-management-how-are-key-decisions-made.html
Capital budgeting techniques in Indian industries.?
Capital budgeting techniques in Indian industries include researching long term investment decisions and making business decisions based on predictions. Evaluations are made and changes can be implemented if an Indian industries need them. .
How do you explain cost of capital and its types?
Explain the term cost of capital and its importance in investment decision
What services does Wells Capital Investment Solutions offer?
Wells Capital Investment Solutions offers legacy portfolio management, fund management, investment decisions advice, and a range of investment management solutions exclusively for professional advisers.
Does capital investment can increase profit in business?
If you mean additional capital investment, YES in terms of amount BUT NOT necessarily in terms of percentage.
Is capital budgeting and capital investment decisions are same?
Yes it is the different names which are used interchangibally for the same process name.
Why is the marginal cost of capital more relevant to making investment decisions than the historic cost of capital?
because of deprecation
Explain the importance of quantitative methods in business?
In business, quantitative methods help the management and the decision makers to have quantifiable estimates of certain decisions. For example, a business can estimate the effect of doubling capital input or borrowing certain loans.
What are the basic financial decision in an organization?
The basic financial decisions include long term investment decisions, financing decisions and dividend decisions. Investment Decision relates to the selection of assets in which funds will be invested by a firm. These decisions are of two types Capital Budgeting Decisions and Working Capital Decisions. Financing Decision is broadly concerned with the asset-mix or the composition of the assets of a firm. The concern of the financing decision is with the financing-mix or capital structure or leverage. Dividend Policy Decision isrelated to the dividend policy.
What does capital income mean?
Capital income can be defined as the income that a person or business makes from the sale of their capital investment assets.
Start Your Own Business with a Capital Investment?
Securing a capital investment can help you start your own business and live out your dreams of becoming your own boss. A capital investment can come from almost anywhere, including from an investor, family and friends or from your own savings. No matter where you get the money, you can usually use it to pay for any expenses you incur when starting your new business. From there, you can reinvest part of your profits to continue growing your business.
