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Investment Decisions in Corporations Essay

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In order to succeed in a competitive market, corporations need to pay much attention to their investment decisions to gain benefits and profits. The process of making effective decisions involves several steps, and it needs to be discussed in detail along with a list of options that are available to corporations for their investment (Trang & Tho, 2017). The purpose of this paper is to provide an explanation of how the majority of corporations make specific investment decisions to add to their profitability and competitive advantage.

The first step in the decision-making process related to investing in the analysis of a current situation with the help of certain tools, such as the cash flow analysis and the analysis of the cost of capital. These tools are important to indicate the current position of a corporation in the market, evaluate its attractiveness to potential investors, and influence its own investing decisions (Goodman, Neamtiu, Shroff, & White, 2013). The second step in the decision-making process is the identification of available options or perspectives in order to improve the discussed situation (Hori & Osano, 2014). Thus, financial managers and members of strategic teams in corporations focus on determining areas to invest in and increase capital.

These areas and options include possibilities for investing in their own business through purchasing assets, resources, and technologies and improving processes in order to make operations cost-efficient, as well as to make their products and services innovative. At this stage, managers in corporations choose the most appropriate assets and resources to invest in, and they plan to receive more revenues because of expansion activities, increased sales, and improved quality (Shroff, Verdi, & Yu, 2013). This approach is actively used by corporations when they do not focus on mergers and acquisitions as part of their strategy.

Another option to choose is the possibility to invest in other businesses, including suppliers, smaller companies, and start-up companies with a high potential for further growth. For example, large corporations often use their venture capital funds in order to invest in firms in the technology industry and receive financial gains in the future (Hori & Osano, 2014). This strategy allows corporations to expand their operations and enter new attractive and actively developing markets because these investment decisions are based on proper evaluations of the latest market trends, as well as on forecasts for the future.

One more option is associated with the investment in foreign industries and markets. Corporations usually choose to expand their activities in many foreign countries because of cost-efficient resources, low taxes, and attractive gains (Ding & Qian, 2014). The decision regarding opening foreign subsidiaries and investing in suppliers from foreign markets depends on the analysis of external environments that influence the development of the industry and competition in the selected country (Shroff et al., 2013). This type of investment decision is associated with investing in stocks, which often results in improving companies’ positions in the market (Ahmad & Anees, 2016). Moreover, corporations can also invest in hedge funds in order to increase their return on assets and improve the currently followed capital distribution strategy.

The third step that corporations should complete in order to make an investment decision is the assessment of options and their advantages and disadvantages. At this stage, managers concentrate on forecasting future cash flows with reference to their investments and the analysis of net present value (Trang & Tho, 2017). As a result of the conducted assessment, financial and strategic development managers in corporations choose those specific options and projects to invest in that are most attractive and potentially profitable for them.

From this point, to make effective investment decisions, it is important to evaluate projects or options for investing in relation to each other in order to receive a full picture regarding forecasted profits. After that, managers and financial experts prioritize options for investment depending on the analysis results. From this perspective, those managers who have developed skills in making financial forecasts and analysis to support investment can potentially make more efficient investing decisions (Goodman et al., 2013).

However, researchers also state that corporations should pay more attention to their investment decisions and the need for investing in order to avoid the problem of overinvestment that is typical of large companies rather than small private firms (Shroff et al., 2013). Thus, investing decisions of corporations are influenced by the fact that managers are often oriented to increasing companies’ investment levels.

The analysis of the scholarly literature on the problem indicates that managers in corporations follow a certain process in order to evaluate investment projects and options. Companies can choose from investing in their own business operations, in their suppliers and other companies in the market to receive a share, in foreign companies, in opening subsidiaries, in purchasing stocks, and in hedge funds. All these options are appropriate for different types of corporations, various environments, and specific market situations. Therefore, in order to make a proper investment decision, corporations concentrate on conducting detailed financial analyses that help them evaluate alternatives and choose the most attractive path for investment.

Ahmad, B., & Anees, M. (2016). Investment decisions stock buybacks or stock prices? Journal of Business Strategies , 10 (2), 51-68.

Ding, Y., & Qian, X. (2014). Investment cash flow sensitivity and effect of managers’ ownership: Difference between central owned and private owned companies in China. International Journal of Economics and Financial Issues , 4 (3), 449-456.

Goodman, T. H., Neamtiu, M., Shroff, N., & White, H. D. (2013). Management forecast quality and capital investment decisions. The Accounting Review , 89 (1), 331-365.

Hori, K., & Osano, H. (2014). Investment timing decisions of managers under endogenous contracts. Journal of Corporate Finance , 29 , 607-627.

Shroff, N., Verdi, R. S., & Yu, G. (2013). Information environment and the investment decisions of multinational corporations. The Accounting Review , 89 (2), 759-790.

Trang, P. T. M., & Tho, N. H. (2017). Perceived risk, investment performance and intentions in emerging stock markets. International Journal of Economics and Financial Issues , 7 (1), 269-278.

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Making Smart Investments: A Beginner’s Guide

Matthew Blume

Reduce the risk factor, increase the reward factor, and generate meaningful returns.

If you make smart decisions and invest in the right places, you can reduce the risk factor, increase the reward factor, and generate meaningful returns. Here are a few questions to consider as you get started.

Why should you invest? At a minimum, investing allows you to keep pace with cost-of-living increases created by inflation. At a maximum, the major benefit of a long-term investment strategy is the possibility of compounding interest, or growth earned on growth.
How much should you save vs. invest? As a guideline, save 20% of your income to to build an emergency fund equal to roughly three to six months’ worth of ordinary expenses. Invest additional funds that aren’t being put toward specific near-term expenses.
How do investments work? In the finance world, the market is a term used to describe the place where you can buy and sell shares of stocks, bonds, and other assets. You need to open an investment account, like a brokerage account, which you fund with cash that you can then use to buy stocks, bonds, and other investable assets.
How do you make (or lose) money? In the market, you make or lose money depending on the purchase and sale price of whatever you buy. If you buy a stock at $10 and sell it at $15, you make $5. If you buy at $15 and sell at $10, you lose $5.

Where your work meets your life. See more from Ascend here .

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MB Matthew Blume is a portfolio manager of private client accounts at Pekin Hardy Strauss Wealth Management . He also manages the firm’s ESG research and shareholder advocacy efforts. He earned a B.S. in electrical engineering from Valparaiso University and an MBA from Northwestern University’s Kellogg School of Management. Matthew is a CFA charterholder.

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Investment Decision Essays (8 Top Tips)

27 days ago

Table of Contents

I. Introduction to Investment Decision Essays

Ii. importance of investment decision essays in finance, iii. elements of well-written investment decision essays, iv. crafting a compelling introduction in investment decision essays, v. conducting in-depth research in investment decision essays, vi. structuring the body of the investment decision essays, vii. analyzing investment strategies in investment decision essays, viii. evaluating risk factors in investment decision essays, ix. frequently asked questions (faqs).

A. Understanding the significance of investment decision essays

Introduction to Investment Decision Essays provides a comprehensive exploration into the significance of investment decision essays. These essays serve as vital tools for investors, offering a platform to analyze, evaluate, and communicate investment strategies and decisions. Through meticulous research and critical analysis, investment decision essays enable individuals to comprehend the complexities of financial markets, risk management, and asset allocation. Furthermore, they facilitate a deeper understanding of economic trends, industry dynamics, and regulatory frameworks, empowering investors to make informed choices amidst uncertain environments.

By delving into topics such as portfolio optimization, capital budgeting, and investment valuation techniques, these essays not only enhance theoretical knowledge but also foster practical skills essential for successful investment management. Ultimately, the significance of investment decision essays lies in their capacity to cultivate a nuanced understanding of the intricacies of investment decision-making, equipping individuals with the tools necessary to navigate the ever-evolving landscape of global finance.

A. Demonstrating critical thinking skills

In the realm of finance, the Importance of Investment Decision Essays extends beyond mere documentation to serve as a platform for demonstrating critical thinking skills. These essays offer a prime opportunity for individuals to showcase their ability to analyze complex financial concepts, evaluate various investment options, and make sound decisions based on thorough reasoning and evidence. By applying critical thinking skills, such as logical reasoning, data interpretation, and problem-solving, writers can effectively dissect investment scenarios, identify potential risks and opportunities, and propose well-founded strategies.

Moreover, through the synthesis of diverse perspectives and the incorporation of real-world examples, these essays not only highlight the author’s depth of understanding but also contribute to the collective knowledge within the field of finance. Thus, demonstrating critical thinking skills in investment decision essays not only enhances individual academic or professional pursuits but also enriches the discourse surrounding financial decision-making processes.

B. Assessing risk management capabilities

In the domain of finance, the Importance of Investment Decision Essays transcends mere academic exercises to serve as a crucible for assessing risk management capabilities. These essays provide a fertile ground for individuals to showcase their prowess in identifying, analyzing, and mitigating risks inherent in investment decisions. By delving into topics such as portfolio diversification, hedging strategies, and scenario analysis, writers can demonstrate their ability to navigate complex financial landscapes with prudence and foresight.

Moreover, through the integration of quantitative models, qualitative assessments, and real-world case studies , these essays offer a holistic view of risk management practices, thereby illuminating the author’s proficiency in balancing risk and return considerations. Thus, assessing risk management capabilities in investment decision essays not only underscores the importance of sound risk management practices but also serves as a testament to the author’s acumen in safeguarding investments against potential adversities.

C. Showcasing knowledge of financial markets

In the realm of finance, the Importance of Investment Decision Essays serves as a canvas for showcasing knowledge of financial markets. These essays offer a unique opportunity for individuals to exhibit their deep understanding of market dynamics, economic indicators, and industry trends. By integrating theoretical frameworks with practical insights, writers can demonstrate their proficiency in analyzing market movements, identifying investment opportunities, and predicting future trends.

Furthermore, through the exploration of topics such as market efficiency, asset pricing models, and behavioral finance, these essays not only highlight the author’s command over financial concepts but also contribute to the collective wisdom of the field. Ultimately, showcasing knowledge of financial markets in investment decision essays not only bolsters individual credibility but also enriches the discourse surrounding investment strategies and market behaviors.

A. Clear articulation of investment thesis

In the landscape of investment decision essays, clarity in articulating the investment thesis stands as a cornerstone among the Elements of Well-Written Investment Decision Essays. A clear and concise investment thesis serves as the guiding principle that underpins the entire essay, providing a roadmap for readers to comprehend the rationale behind the investment decision. Through precise language and logical structure, writers can effectively communicate their perspective on the investment opportunity, outlining the key drivers, risks, and expected outcomes.

Additionally, a well-articulated investment thesis demonstrates the author’s ability to distill complex information into actionable insights, fostering understanding and engagement among readers. By adhering to this fundamental element, investment decision essays not only enhance readability but also strengthen the persuasiveness and credibility of the author’s argument, ultimately contributing to the discourse on investment strategies and decision-making processes.

B. Thorough analysis of market conditions

Within the framework of well-written investment decision essays, a thorough analysis of market conditions emerges as a crucial element. This aspect requires writers to delve deeply into the prevailing economic, financial, and industry-specific factors that shape the investment landscape. By conducting comprehensive research and utilizing robust analytical tools, writers can offer valuable insights into market trends , competitive dynamics, and regulatory environments. Furthermore, a meticulous examination of market conditions enables writers to assess the potential risks and opportunities associated with the investment thesis, thus enhancing the overall credibility and persuasiveness of the essay.

Through the incorporation of quantitative data, qualitative assessments, and insightful interpretations, investment decision essays can effectively demonstrate the writer’s ability to navigate complex market dynamics and make informed investment decisions. Consequently, a thorough analysis of market conditions not only enriches the content of investment decision essays but also contributes to a deeper understanding of the intricacies of financial markets among readers.

C. Evaluation of potential risks and rewards

In the realm of well-written investment decision essays, the evaluation of potential risks and rewards stands out as a pivotal element. This aspect necessitates a comprehensive examination of the factors that may impact the success or failure of an investment opportunity. Writers must meticulously analyze various risk factors, including market volatility, regulatory changes, and industry-specific challenges, while also considering the potential rewards such as return on investment, growth prospects, and competitive advantages.

By employing rigorous methodologies and critical thinking skills, writers can provide readers with a balanced assessment of the risk-return profile associated with the investment thesis. Furthermore, an effective evaluation of potential risks and rewards enables writers to make informed recommendations and justify their investment decisions with clarity and conviction. Thus, within the elements of well-written investment decision essays, the evaluation of potential risks and rewards plays a crucial role in guiding readers towards understanding the complexities of investment strategies and fostering informed decision-making.

D. Incorporation of relevant financial metrics

In the realm of well-written investment decision essays, the incorporation of relevant financial metrics emerges as a fundamental element. This aspect necessitates the utilization of quantitative measures and indicators to assess the financial performance and viability of an investment opportunity. Writers must adeptly select and apply a range of financial metrics, such as return on investment (ROI), earnings per share (EPS), price-to-earnings (P/E) ratio, and cash flow analysis, to provide a comprehensive evaluation of the investment thesis. By employing these metrics, writers can offer readers valuable insights into the profitability, liquidity, and financial health of the investment target.

Moreover, the strategic use of financial metrics enables writers to support their arguments with empirical evidence, enhancing the credibility and persuasiveness of the essay. Ultimately, the incorporation of relevant financial metrics within well-written investment decision essays plays a crucial role in facilitating informed decision-making and fostering a deeper understanding of the financial implications of investment strategies.

Crafting a compelling introduction in investment decision essays is paramount to engaging readers and setting the stage for a persuasive argument. A well-crafted introduction should captivate the audience’s attention by providing context for the investment decision under consideration and highlighting its significance within the broader financial landscape. Writers can achieve this by framing the problem statement, outlining the objectives of the essay, and foreshadowing key insights or conclusions.

Additionally, incorporating relevant statistics, anecdotes, or industry trends can serve to pique readers’ curiosity and establish credibility from the outset. By striking a balance between informativeness and intrigue, a compelling introduction not only entices readers to delve deeper into the essay but also lays the groundwork for a coherent and compelling narrative that guides them through the intricacies of the investment decision.

A. Utilizing credible sources and data

In the realm of investment decision essays, conducting in-depth research entails the meticulous utilization of credible sources and data to underpin arguments and insights. Writers must navigate a vast array of information to gather relevant data, industry reports, academic journals, and expert opinions. By employing credible sources, such as reputable financial institutions, scholarly publications, and government agencies, writers can ensure the reliability and accuracy of the information presented. Furthermore, leveraging empirical data and statistical analysis adds depth and credibility to the essay, enabling writers to substantiate their claims and conclusions with tangible evidence.

Through rigorous research practices, investment decision essays not only demonstrate the writer’s commitment to academic integrity but also foster a deeper understanding of the complexities of investment strategies and decision-making processes among readers.

B. Analyzing historical trends and patterns

In the process of conducting in-depth research for investment decision essays, analyzing historical trends and patterns plays a crucial role in providing valuable insights into the dynamics of financial markets. By examining past performance, writers can identify recurring patterns, market cycles, and historical precedents that may influence future investment outcomes. Through the systematic analysis of historical data, including price movements, volatility trends, and macroeconomic indicators, writers can discern underlying patterns and correlations, thereby informing their investment thesis with a deeper understanding of market behavior.

Moreover, studying historical trends enables writers to assess the effectiveness of various investment strategies in different market conditions and derive lessons learned from past successes and failures. Ultimately, by incorporating historical analysis into their research, investment decision essays can offer readers a comprehensive perspective on the complexities of investment decision-making and enhance the credibility and robustness of their arguments.

C. Incorporating expert opinions and industry insights

In the endeavor of conducting in-depth research for investment decision essays, the incorporation of expert opinions and industry insights serves as a cornerstone for enriching the analysis and fostering a comprehensive understanding of the investment landscape. By consulting with seasoned professionals, industry experts, and reputable analysts, writers can gain valuable perspectives on market trends, emerging opportunities, and potential risks. These expert opinions offer nuanced insights that complement quantitative data and historical analysis, providing a well-rounded view of the investment thesis.

Furthermore, leveraging industry insights enables writers to anticipate future developments and adapt their investment strategies accordingly, thereby enhancing the relevance and applicability of their research findings. Through the integration of expert opinions and industry insights, investment decision essays not only demonstrate the writer’s commitment to rigorous research but also contribute to a deeper understanding of the complexities of investment decision-making among readers.

A. Organizing arguments logically

Structuring the body of investment decision essays entails organizing arguments logically to present a coherent and persuasive narrative. Writers must carefully arrange their ideas and evidence in a systematic manner, ensuring a clear flow of logic that guides readers through the complexities of the investment thesis. By establishing a logical structure, such as grouping related arguments together or presenting them in a chronological or cause-and-effect sequence, writers can enhance the readability and comprehension of their essays.

Additionally, employing transitional phrases and topic sentences helps to connect ideas and maintain coherence throughout the body of the essay. Through this strategic organization of arguments, investment decision essays not only effectively convey the writer’s reasoning and analysis but also facilitate a deeper engagement with the subject matter, ultimately guiding readers towards a more informed understanding of the investment opportunity at hand.

B. Presenting evidence to support claims

In structuring the body of investment decision essays, presenting evidence to support claims is essential for building credibility and persuasiveness. Writers must meticulously integrate relevant data, statistics, and examples to substantiate their arguments and assertions. By providing empirical evidence, such as financial statements, market research findings, and historical trends, writers can bolster the validity of their claims and enhance the reader’s confidence in the proposed investment thesis. Moreover, presenting evidence in a clear and compelling manner helps readers to understand the rationale behind the investment decision and evaluate its potential merits.

Through the strategic incorporation of evidence throughout the body of the essay, investment decision essays not only demonstrate the writer’s depth of analysis but also foster a more informed and nuanced understanding of the investment opportunity being discussed.

C. Addressing potential counterarguments

In structuring the body of investment decision essays, addressing potential counterarguments is crucial for presenting a well-rounded and thorough analysis. Writers must anticipate and acknowledge alternative viewpoints or criticisms that may challenge the validity of their investment thesis. By preemptively addressing potential counterarguments, writers demonstrate a nuanced understanding of the complexities surrounding the investment decision and showcase their ability to engage critically with opposing perspectives.

Moreover, addressing counterarguments allows writers to strengthen their own arguments by either refuting opposing views with evidence and logical reasoning or incorporating them into a broader discussion that enriches the analysis. Through this approach, investment decision essays not only demonstrate intellectual rigor and open-mindedness but also foster a more comprehensive and persuasive narrative that encourages readers to consider multiple viewpoints before forming their own conclusions.

A. Exploring different approaches to investing

In analyzing investment strategies within investment decision essays, exploring different approaches to investing is essential for providing readers with a comprehensive understanding of the options available. Writers must delve into a range of investment methodologies, such as value investing, growth investing, momentum investing, and passive investing, among others. By examining the principles, advantages, and potential drawbacks of each approach, writers can offer readers insights into the diverse strategies employed by investors to achieve their financial goals.

Moreover, exploring different approaches allows writers to highlight the importance of aligning investment strategies with individual risk tolerance, investment objectives, and time horizon. Through this exploration, investment decision essays not only broaden readers’ perspectives on investment opportunities but also empower them to make informed decisions tailored to their unique financial circumstances.

B. Assessing the suitability of strategies based on market conditions

In the analysis of investment strategies within investment decision essays, assessing the suitability of strategies based on market conditions is imperative for guiding readers towards prudent investment decisions. Writers must evaluate how different strategies perform under varying market conditions, considering factors such as economic cycles, interest rates, and geopolitical events. By examining the strengths and weaknesses of each strategy in relation to prevailing market dynamics, writers can provide readers with valuable insights into the appropriateness of deploying specific approaches at different times.

Moreover, assessing the suitability of strategies based on market conditions allows writers to emphasize the importance of adaptability and flexibility in investment decision-making. Through this assessment, investment decision essays not only equip readers with the knowledge to navigate changing market environments but also empower them to adjust their investment strategies accordingly to optimize returns and manage risks effectively.

C. Comparing and contrasting investment methodologies

In the analysis of investment strategies within investment decision essays, comparing and contrasting investment methodologies serves as a cornerstone for understanding the nuances of different approaches. Writers must delve into the principles, objectives, and techniques employed by various investment methodologies, such as fundamental analysis, technical analysis, and quantitative analysis. By examining the similarities and differences between these methodologies, writers can highlight their respective strengths, weaknesses, and areas of applicability.

Moreover, comparing and contrasting investment methodologies allows writers to showcase the diversity of strategies available to investors and the importance of selecting an approach that aligns with their investment goals and risk preferences. Through this exploration, investment decision essays not only deepen readers’ understanding of investment strategies but also equip them with the knowledge to make informed decisions that suit their individual financial circumstances.

In investment decision essays, evaluating risk factors is paramount to understanding the potential pitfalls and uncertainties associated with investment opportunities. Writers must carefully assess a wide range of risk factors, including market volatility, economic instability, regulatory changes, and company-specific risks. By conducting a thorough evaluation of these factors, writers can quantify the level of risk inherent in the investment and develop strategies to mitigate or manage it effectively. Moreover, evaluating risk factors allows writers to demonstrate their awareness of the complex interplay between risk and return, emphasizing the importance of striking a balance between maximizing potential gains and safeguarding against potential losses.

Through this process, investment decision essays not only inform readers about the inherent risks of investment opportunities but also empower them to make informed decisions that align with their risk tolerance and investment objectives.

A. What should be the ideal length of an investment decision essay?

B. How can I make my essay stand out from others?

C. Should I include personal anecdotes in my essay?

D. Is it necessary to include citations and references?

E. How do I handle conflicting viewpoints in my essay?

F. Can I use bullet points or diagrams to enhance clarity?

G. What are the common pitfalls to avoid while writing investment decision essays?

H. How do I balance technical analysis with qualitative insights in my essay?

I. Is there a preferred writing style for investment decision essays?

J. Should I focus more on past performance or future projections in my analysis?

K. How do I choose relevant case studies to include in my essay?

L. What role does ethics play in investment decision essays?

M. How do I demonstrate originality and creativity in my essay?

N. What are some recommended resources for further reading on this topic?

O. Can I discuss personal investment experiences in my essay?

P. How should I format my essay to meet academic or professional standards?

Q. What are the key differences between investment decision essays for academic vs. professional audiences?

R. How do I approach writing about emerging or unconventional investment opportunities?

S. Should I include a reflection on my own investment philosophy in the conclusion?

T. How can I effectively incorporate feedback from reviewers or instructors into my essay?

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Essay: Investment Decisions

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Investment Decisions

Investment projects are a big and an important part of Romania’s economy. Through this thesis we can find out more about the profitability of an investment, more specifically, in the case study I chose a project from the oilfield area, where I’m trying to find out the impact of having the biggest mud plant from the country, built after German standards. Investment notion defines a complex and very controversial financial category. At a first look, investment appears just as a growth in the company’s initially heritage: industrial and civil construction, acquisition, assembly and installation of industrial equipment, purchase of machinery, etc.. At a second look and a deeper analysis, investment is capital allocation with a profitable purpose that will increase the amount of capital used. Investment decisions typically involve the commitment of large sums of money, and they will affect the business over a number of years. Furthermore, the funds to purchase a capital item must be paid out immediately, whereas the income or benefits accrue over time. (Michael Boehlje and Cole Ehmke, Capital Investment Analysis and Project Assessment) It is mandatory for management to become very circumspect about allocating limited resources among competing opportunities. The critical decision of allocating resources for a project is known as capital budgeting. The ability to make such a critical capital allocation decision requires a proper estimate of the worth of each opportunity concerning the projects which is a function of size, timing and predictability of future cash flows. Most academicians state that effective cost allocation for an investment project can best be achieved with a sophisticated capital investment process. They assume that a sophisticated process increases the probability of making relevant investments by ensuring that corporate strategy will be followed, that all investment opportunities will be considered appropriately and consistently, and that the counterproductive political aspect of informal decision making will be minimized. Because investment decisions rank among the most critical types of managerial decisions made in a company and can have major long-term implications, both positive and negative, for the success of a company, managers must understand how financial investment decisions are made if they are to participate in improving corporate performance. Ultimate part of the research on financial investment analysis has been conducted by financial scholars who have developed project evaluation techniques. Though, there is a management literature that takes a process approach to the subject and places financial evaluation in the context of a complex organizational decision process. The rest of this paper is organized as follows. In the first section I present in detail the project evaluation process and the main investment criteria, from both financial and non-financial analysis. In section two, I present a detailed analysis of the data, through the case study and discuss othe results both on their own and in the context of existing literature. I placed most of the tables, which summarise the financial analysis calculations, at the end of the paper (Appendix) due to their large extension. Finally, in the last section I present my conclusions and advises for this investment project.

2. Project Evaluation ‘ Investment Criteria

Effective investment decision making is essential to corporate survival and long-term success. These decisions help to mould company’s future opportunities and develop competitive advantage by influencing, among other things, its technology, its processes, its working practices and its profitability. Completing a thorough investment analysis may seem complicated and difficult. But the reward of a soundly based decision will be worth the effort invested to learn the process and collect the necessary information. (Michael Boehlje and Cole Ehmke, Capital Investment Analysis and Project Assessment)

There are several important features for an investment decision making to be effective (Boquist et al. (1998), Adams et al. (2004), apud ‘.): ‘ It is dynamic, not static. It explicitly recognizes that the quality of information can be improved over time. Thus capital budgeting should be a sequential, multiple decision process that integrates the information needed to obtain cash flow estimates into the financial analysis of the cash flows. ‘ It is linked to the strategy implementation in relation to the company’s multiple stakeholders. Therefore, project proposals should be supported by relevant non-financial data and forecasts. ‘ It recognizes the options inherent in value-enhancing capital budgeting. ‘ It takes a cross-functional approach. The quality of estimates of expected cash flows and the uncertainty in cash flows are critical. Since the underlying information for these estimates comes from many functions within the company, those providing information must see themselves as strategic partners in the process. The investment decision rules may be referred to as capital budgeting techniques, or investment criteria. A sound appraisal technique should be used to measure the economic worth of an investment project. The essential property of a sound technique is that is should maximize the shareholders wealth. The following other characteristics should also be possessed by a sound investment evaluation criterion: ‘ It should consider all cash flows to determine the true profitability of then project. ‘ It should provide for an objective and unambiguous way of separate good projects from bad projects. ‘ It should help ranking of projects according to their true profitability. ‘ It should recognize the fact that bigger cash flows are preferable to smaller ones and early cash flows are preferable to later ones. ‘ It should help to choose among mutually exclusive projects that project which maximizes the shareholders wealth. ‘ It should be a criterion which is applicable to any conceivable investment project independent of others. The importance of investment decisions has lately even increased. There is a short of available funds in the current world economy due to the financial crisis, and thus all the investments and capital allocations must be directed to profitable projects. In times of uncertainty, companies also seek ways to expand their operations to new areas of business, whether the expansion is geographical or operational. In these types of situations, strategic and long-term aspects become more important than short-term profit. On the other hand, the pressure to comply with the financial targets set to the management is playing key role in some organisations’ strategic investment decisions (SID’s). Investment decisions, and also strategic investment decisions, have been studied in the light of utilized capital budgeting techniques quite thoroughly in the current literature (e.g. Alkaraan and Northcott, 2006; Arnold and Hatzapoulos, 2000; Farragher et al., 1999; Graham and Harvey, 2001; Pike, 1996; Sandahl and Sj??gren, 2003; Liljeblom and Vaihekoski, 2004). These studies have concentrated on the techniques that are used and not that much on how they are used and what contextual setting affect to the use of appropriate techniques. Research evidence also indicates that organisations weight strategic and financial aspects quite differently (e.g. Carr and Tomkins, 1996, 1998). Also differences between different countries (compare e.g. Graham and Harvey, 2001; Sandahl and Sj??gren, 2003; Brounen, De Jong & Koedijk, 2004) and small versus large corporations (Graham and Harvey, 2001; Pike, 1996) have been observed. The caveat, however, has been that no studies have sought to create systematic approach to explain the above mentioned differences in applied capital budgeting techniques of organizations. 2.1 Financial analysis

Projects of investment character can be in term of quantitative outputs characterized by three basic factors, mainly by cash flows, or by the difference between receipts and expenditures resulting from the investment, by the real service life and by the risk, that is run by implementation of the investment and for which the enterprise should require an adequate return. There are many methods or criterions for evaluating capital projects that approach to these basic factors in different ways. Criterions of evaluating projects from a financial analysis point of view can be divided into two groups ‘ static and dynamic criterions. Static criterions consider mainly cash flows. They consider time in constraint mode and in principle they do not work with risk. They include e.g. total investment income, net total investment income, annual average returnability, average payback period, payback period. Dynamic criterions take into account all three factors which mean cash flows, service life and undergone risk as well. They involve e.g. Net Present Value (NPV), Internal rate of return (IRR), Profitability index (PI), Discounted Payback period (PP). During the evaluation of investments, other instruments are being used, mainly in connection with integration of the risk and uncertainty into this process of evaluation. They include above all sensitivity analysis, scenarios and simulation techniques. Evaluation of flexible investment projects is enabled by real options. Choice of a criteria for evaluating investments from a financial point of view reflects more aspects, mainly preferences of the decision-maker (impact on relative or absolute profitability, stress on short Payback Period, existence of the budget constraint). Although the financial area covers many ways to evaluate a project, most of the companies consider the most important net present value, after it the internal rate of return (IRR) as beeing a relevant decision criteria as well. They also prefer to use scenario analysis, payback period and benefit/cost ratio. The least relevant financial techniques are real options, accounting rate of return, break-even point and simulation risk (Graham and Harvey, 2001 study).

2.2 Is financial analysis enough?

Recent literature has been emphasising the need to take both financial and nonfinancial aspects into consideration when considering capital budgeting decisions. This is to be done since the early stages of project appraisal, and not only when risks become reality. We wanted to know to what extent portuguese companies are aware of the importance of non financial aspects at their project appraisal processes, and, in their practices, what exactly they are doing and considering as more or less important. There are several traditional methods used by analysts for evaluating a project’s viability. These include the net present value, internal rate of return, payback method and others. However, none of these investment assessment tools for capital budgeting takes into consideration the uncertainty of variables that may occur in the future. While, the traditional methods of analyzing projects are widely accepted, they neglect management’s ability and flexibility to respond to uncertainties that are likely to affect their projects. The traditional methods typically assume a single line of development for a project and simply incorporate the probability of failure into the overall expected value for the project. The probability of failure is carried as a discount rate that in itself is a very hard value to assign. The decision-making process for investments is complex and goes beyond the financial aspects. Skitmore et al. (1989) point out that ‘any knowledge that can help the decisionmakers(…) to recognize and minimize the uncertainty and risk is expected to have somepotential value’. Many of the project’s goals tend to be qualitative and not easily measurable, apart from being long term goals and not immediately verifiable. Andreou et al. (1989) note that a project generates externalities, in terms of costs and benefits that are not taken into account in financial forecasts. The financial techniques must be used only as a guide, or a baseline, and other factors that may influence the uncertainty analysis must be considered. The financial evaluation is only a part of the decisionmaking process and additional information is needed. Therefore, even if the financial conditions are extremely favorable, neglecting some of the qualitative aspects may cause serious problems. The capital budgeting process must enclose a wide spectrum of analysis dimensions, whether financial or not, as a way to fully study all the aspects that may influence its viability. 2.3 Non-financial analysis

Myers (1984, a, p. 131) refers that ‘the non-financial approach taken in many strategic analyses may be an attempt to overcome the short horizons and arbitrariness of financial analysis as it is often misapplied’. Non-financial factors can influence the investment decision in that it can influence the viability and success, as well as affect the financial analysis through the cash flows and the discount rate of the project. The problem is that there are many non-financial aspects that are not easily translated into monetary terms, because some factors are difficult to estimate and can produce evaluation errors easily. The difficulty in evaluating these aspects is related to their intangible nature and measurement problems, which make this analysis highly subjective. Mohanty et al (2005, p. 5199) refer that qualitative attributes are ‘often accompanied by certain ambiguities and vagueness because of the dissimilar perceptions of organizational goals among pluralistic stakeholders, bureaucracy and the functional specialization of organizational members’. This might be one of the reasons why the practice of firms still has a long way to go. Mohamed and McCowan (2001, p. 232) consider that the ‘lack of know-how in measuring strategic and intangible (qualitative) costs and benefits led current models to ignore their contribution to the overall economic analysis’. In this way, Lopes and Flavell (1998) recognize that a ‘major reason why non-financial and non-technical aspects are not considered more fully during project appraisal is probably the lack of an analytic framework that would highlight the importance of those aspects and would provide guidelines on how to incorporate them into the appraisal’. Therefore factors like: commercial, political, social, environmental, organizational, human resources and project manager, should also be taken into consideration when you evaluate a project. ‘ The human resource factor: Large companies place more importance, relatively to small companies, on interpersonal relationships, the ability to work as a team, joining people with complementary skills, problem-solving ability, the level of unionized workers, attribution of autonomy, authority and responsibility, incentives to team spirit and collective decision-making. In expansion projects, compared to other types, less importance is attributed to the ability to evaluate risks, joining people with complementary skills, trust between team members, incentives to team spirit and collective decision-making. In long term projects greater importance is attributed to the ability to evaluate risks, the ability to work for common goals and trust between team members, and less importance is attributed to external recruiting. Note also that internal recruiting tends to be more important in companies where the CEO’s tenure is short, and when the project manager is also on the board/administration. We also see that when CEO’s tenure is short, when the project manager is young, and when the decision is made by someone who is not on the administration, the perspectives of future Large companies place more importance, relatively to small companies, on interpersonal relationships, the ability to work as a team, joining people with complementary skills, problem-solving ability, the level of unionized workers, attribution of autonomy, authority and responsibility, incentives to team spirit and collective decision-making. In expansion projects, compared to other types, less importance is attributed to the ability to evaluate risks, joining people with complementary skills, trust between team members, incentives to team spirit and collective decision-making. In long term projects greater importance is attributed to the ability to evaluate risks, the ability to work for common goals and trust between team members, and less importance is attributed to external recruiting.

‘ Project Manager Analysis

The choice of a Project Manager (PM) being the leader of the project needs special attention. The role of the project manager is mainly related with understanding the business’s environment and delegating and attributing responsibilities. As for the attributes identified as needed: management skill, decision-making skill and leadership skill stand out as the most important ‘ as in Shenhar et al. (1997), Turner and Muller (2003, 2005), Pozner (1987), Pettersen (1991) and Thoms and Pinto (1999). On the other hand, in short term projects, the appropriate exercise of authority and the manager’s creativity are more important than in longer term projects. In small projects the project manager’s success within the organisation, ambition and energy are more important and the management skill is less important than in larger projects. Lastly, in those projects viewed as least successful manager’s technical and motivational skills are more important than in more successful projects. ‘ Economic Uncertainty Market variables such as the price of oil and gas, interest rate, and currency exchange rate are economic uncertainties that greatly affect the viability of a project. Another important factor is that the state of the targeted market economy that is where the commodities are intended to be sold is always an uncertain factor. An important question to be asked is whether consumers have the purchasing power to be able to buy the commodity. These economic factors are very volatile and correlate with the general movement of the economy. Uncertainty can be favorable when the price of oil and gas increases and the corresponding increase in purchasing power generates higher cash inflow. ‘ Political Uncertainty Investors deciding to undertake a foreign investment need to consider political uncertainty and the likelihood of affecting their business. Firms encounter political uncertainty and complexity especially in the developing countries. These uncertainties and complexities are risks that range across economic, financial, legal and social conditions of the foreign country. In general risk from political uncertainty can be grouped onto two categories. First, there are risks that may not be directly caused by the government such as war, uprising of certain group, or other forms of violence. Second, there are risks that are caused through government policies, for example export and import restrictions, tariffs and taxes, price control, expropriation, devaluation of currency and other foreign exchange control. Political risks stem from government policies which are exhibited through the national economy and social structures within the country. The host government tends to create risk for the affecting firm that can be manifested through its policies, laws, regulations and administrative pronouncements. They impose implicit transfer risk to firms in their country in many ways. It is sometimes evident when the government restricts the firm from sending remittance of earning or repatriation of profits to the parent firm. Another political risk that can affect foreign firms is operational risk. It is seen when government require the majority of employees to be hired for the operation from the country (or local area), but there may not be enough skilled workers as needed by the firm. Government policies at times pose serious problems to the firm when it is made to go through difficult work permit procedures for employing competent worker who do not come from the operating country. The worst among the numerous risks is expropriation by government, in which government takes control of the firm by force and pays little compensation or nothing at all to the original owners of the firm. The act is usually exhibited by military takeovers in destabilized countries. It is an unacceptable behavior but may be encountered. Governments can sometimes pass laws to prevent proven oil and gas reserves and resources from being explored and produced due to environmental threats to the country, even when a firm has already acquired a lease for its operations. For example, the U.S Congress has enacted moratoriums on drilling and exploration in areas along the coasts of some states. These policies are intended to protect coastlines from even unintentional oil spills, although the Mineral Management Service estimates that there is an approximate 76 billion barrels of oil in the undiscovered fields offshore in the U.S. outer continental shelf (Jarmon & Anderson, 2007). However, government actions can also be affirmative and can have a positive impact on a project. The positive steps a government takes to aid companies can be seen in term of tax exemptions for some number of years, or tax reductions which decrease the cash out flows of the firm which may result a corresponding increase in profit. 3. Case Study: M-I SWACO Romania

3.1 Company presentation

With over 13,000 employees in more than 75 countries around the world, M-I SWACO is a vital part of the world’s hydrocarbon exploration and production industry. The company is the leading supplier of drilling fluid systems engineered to improve drilling performance by anticipating fluids-related problems, fluid systems and specialty tools designed to optimize wellbore productivity, production technology solutions to maximize production rates, and environmental solutions that safely manage waste volumes generated in both drilling and production operations. In August 2010, M-I SWACO became part of Schlumberger through its merger with Smith International. The primary driver behind this merger is drilling optimization. In order to sustain and increase world oil and gas production, higher levels of drilling will be necessary in increasingly challenging and complex environments. This means wells with longer and more complex profiles. Understanding the technical challenges and mitigating the consequent risk in advance of a drilling program can mean major cost savings and well performance improvement for our customers. M-I SWACO will play a critical part in meeting these challenges. From its earliest roots, M-I SWACO recognized that it best served its clients, not by delivering drilling fluid products to the client’s location, but by anticipating and planning for how those products would behave in the downhole environment, both to optimize drilling performance and to minimize the risk associated with fluids-related problems.

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Deciphering Capital Budgeting: a Guide to Strategic Investment Decision

This essay about capital budgeting outlines the process and significance of evaluating major investment decisions in business. It describes how businesses use methods like Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period to analyze potential investments. NPV helps determine the profitability by comparing future cash flows to the initial investment, while IRR identifies projects that exceed the company’s required rate of return. The Payback Period assesses the time it takes for an investment to repay its initial cost. Additionally, the essay emphasizes the importance of aligning investments with strategic business goals and the necessity of considering risk and opportunity cost in making investment decisions. Through capital budgeting, businesses can make informed decisions that enhance long-term growth and profitability.

How it works

Capital budgeting is an essential financial planning procedure that is necessary for any firm that wants to grow and succeed. Businesses are able to weigh the advantages and disadvantages of major investment possibilities by using this form of financial assessment. Introducing a new product line, buying new technology, or entering untapped areas are a few examples of such investments. The key to capital budgeting is its capacity to calculate future financial returns relative to the money invested originally, which guarantees that resources be utilized as efficiently as possible.

The process of capital budgeting usually starts with the identification of possible investment opportunities. This phase is essential because it lays the framework for upcoming investigations and choices. After possible projects have been found, a thorough analysis is carried out to project the future cash flows that the investment will produce. This report also includes a detailed evaluation of the project’s financial viability and a cost estimate.

A key instrument in capital budgeting is the Net Present Value (NPV) technique. By reducing future expected cash flows to a single present value, this method evaluates an investment through the application of a discount rate, which often represents the cost of capital or the intended rate of return. A project is often approved when its expected profit exceeds its capital expenditure, which is shown by a positive net present value (NPV). However, since a project with a negative net present value (NPV) is likely to result in a decrease in the company’s worth, it is typically rejected.

Another pivotal method used is the Internal Rate of Return (IRR). This metric calculates the rate of return at which the present value of cash flows equals the initial investment; in essence, it helps determine the break-even rate of return for the project. The higher the IRR, the more desirable the project, as it suggests a greater potential return on investment. Projects are often compared based on their IRRs, with preference given to those yielding returns above the company’s hurdle rate, or minimum required rate of return.

Besides NPV and IRR, the Payback Period is another method employed, albeit simpler and less rigorous. It measures the time it takes for an investment to “pay back” its original cost from its cash flows. While this method does not account for the value of money over time, it offers a straightforward assessment of an investment’s liquidity risk and quick financial recovery.

However, capital budgeting isn’t solely about crunching numbers and predicting financial outcomes. It also encompasses a strategic review to align potential investments with the company’s long-term goals. An investment that might not be the most lucrative in the short term could be critical for strategic positioning or for achieving competitive advantage in the long run.

Risk analysis also plays a crucial role in capital budgeting. Every investment carries potential risks—financial, operational, or market-related. Effective capital budgeting must evaluate these risks through techniques such as sensitivity analysis, which examines how changes in key assumptions impact investment returns. Understanding these risks helps in making more informed, robust investment decisions.

Moreover, the concept of opportunity cost is intrinsic to capital budgeting. Each investment decision necessarily foregoes alternative uses of the same funds. Thus, assessing whether an investment is the best use of available resources relative to other options is fundamental.

In sum, capital budgeting is more than a mere financial evaluation—it is a comprehensive decision-making tool that aids businesses in managing future growth and profitability through prudent investment strategies. By employing methods like NPV, IRR, and the Payback Period, and by integrating strategic and risk considerations, businesses can navigate their financial futures more confidently and effectively. This meticulous approach to capital allocation not only maximizes returns but also aligns investments with broader business objectives, ensuring long-term sustainability and success.

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1. Getting Started in Investing

2. know what works in the market.

3. Know Your Investment Strategy

4. Know Your Friends and Enemies

5. find the right investing path.

6. Be in It for the Long Term

7. Be Willing to Learn

The bottom line, 7 steps to a successful investment journey.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

The most successful investors were not made in a day. Learning the ins and outs of the financial world and your personality as an investor takes time and patience, not to mention trial and error. In this article, we'll lead you through the first seven steps of your expedition into investing and show you what to look out for along the way.

Key Takeaways

Your investing journey starts with a plan and a time frame; when you know how long you're investing for and what you hope to gain, you can put the structure in place to achieve it.
Next, learn about how the market works, figure out what investment strategy is best for you, and determine what kind of investor you are.
Be careful who you're taking advice from and be mindful of your own prejudices and assumptions, as you find the right path for you.
Make sure you understand this is a long-term journey so that you won't get tripped up by short-term setbacks; always stay open and learn from your mistakes.

Successful investing is a journey, not a one-time event, and you'll need to prepare yourself as if you were going on a long trip. Begin by defining your destination, then plan your investment journey accordingly. For example, are you looking to retire in 20 years at age 55? How much money will you need to do this? You must first ask these questions. The plan that you come up with will depend on your investment goals.

Read books or take an investment course that deals with modern financial ideas. The people who came up with theories such as portfolio optimization, diversification, and market efficiency received their Nobel prizes for good reason. Investing is a combination of science (financial fundamentals) and art (qualitative factors).

The scientific aspect of finance is a solid place to start and should not be ignored. If science is not your strong suit, don't fret. There are many texts, such as Stocks for the long run by Jeremy Siegel, that explain high-level finance ideas in a way that is easy to understand.

Once you know what works in the market, you can come up with simple rules that work for you. For example, Warren Buffett is one of the most successful investors ever. His simple investment style is summed up in this well-known quote: "Never invest in a business you cannot understand." It has served him well. While he missed the tech upturn, he avoided the subsequent devastating downturn of the high-tech bubble of 2000.

3. Know Your Investment Strategy

Nobody knows you and your situation better than you do. Therefore, you may be the most qualified person to do your own investing —all you need is a bit of help. Identify the personality traits that will assist you or prevent you from investing successfully, and manage them accordingly.

A very useful behavioral model that helps investors to understand themselves was developed by fund managers Tom Bailard, Larry Biehl, and Ron Kaiser.

The model classifies investors according to two personality characteristics: method of action (careful or impetuous) and level of confidence (confident or anxious).

Based on these personality traits, the BB&K model divides investors into five groups:

Individualist – careful and confident, often takes a do-it-yourself approach
Adventurer – volatile, entrepreneurial, and strong-willed
Celebrity – a follower of the latest investment fads
Guardian – highly risk-averse , wealth preserver
Straight Arrow – shares the characteristics of all of the above equally

Not surprisingly, the best investment results tend to be realized by an individualist, or someone who exhibits analytical behavior and confidence and has a good eye for value. However, if you determine that your personality traits resemble those of an adventurer, you can still achieve investment success if you adjust your strategy accordingly.

In other words, regardless of which group you fit into, you should manage your core assets in a systematic and disciplined way.

Beware of false friends who only pretend to be on your side, such as certain unscrupulous investment professionals whose interests may conflict with yours. You must also remember that, as an investor, you are competing with large financial institutions that have more resources, including greater and faster access to information.

Bear in mind you are potentially your own worst enemy. Depending on your personality, strategy, and particular circumstances, you may be sabotaging your own success. A guardian would be going against their personality type if they were to follow the latest market craze and seek short-term profits.

Because you are risk-averse and a wealth preserver, you would be affected far more by large losses that can result from high-risk, high-return investments. Be honest with yourself, and identify and modify the factors preventing you from investing successfully or moving you away from your comfort zone.

Your level of knowledge, personality, and resources should determine the path you choose. Generally, investors adopt one of the following strategies:

Don't put all of your eggs in one basket. In other words, diversify .
Put all of your eggs in one basket, but watch your basket carefully.
Combine both of these strategies by making tactical bets on a core passive portfolio.

Most successful investors start with low-risk diversified portfolios and gradually learn by doing. As investors gain greater knowledge over time, they become better suited to taking a more active stance in their portfolios.

Online brokers have an abundance of tools that can help investors of all levels; we've done an extensive review and ranking of more than 70 online brokers to find the best one for you.

6. Be in It for the Long Term

Sticking with the optimal long-term strategy may not be the most exciting investing choice. However, your chances of success should increase if you stay the course without letting your emotions, or "false friends," get the upper hand.

The market is hard to predict, but one thing is certain: it will be volatile . Learning to be a successful investor is a gradual process and the investment journey is typically a long one. At times, the market will prove you wrong. Acknowledge that and learn from your mistakes.

Whether you are just getting started or want to improve your skills, check out the Investopedia Academy where we have dozens of online courses for every kind of investor.

How Should a Beginner Start to Invest?

The first step a new investor should take is to determine their investment goals "Why are you investing?" Are you planning for retirement? Saving up to buy a house? Knowing your goals will guide your investment decisions. From there, determine your investment vehicles, such as purchasing stocks, investing in ETFs or mutual funds, setting up a retirement account, and so on. You should also consider how much you want to invest as well as your time horizon.

What Are Good Beginner Investments?

One of the best ways to start investing is by contributing to your retirement account at work if you have one. If your company has a 401(k) for example, you can start contributing there. If it does not, you can start retirement planning on your own with an IRA. From there, a simple way to invest is by putting money in an index fund; funds that track an index such as the S&P 500. These funds, particularly exchange-traded funds (ETFs), are easy to buy and sell, come with low fees, and provide a wide breadth of exposure to the markets.

How Much Money Do I Need to Start Investing?

You can start investing with any amount of money. If you have a retirement plan at work, you can allocate part of your salary to contribute to the plan. If there is a stock you want to buy, you only need enough to buy one share to get started.

Starting to invest can be an exciting time but also challenging for newcomers. There are lots of financial products and plenty of different investment advice out there. As you start, first educate yourself on investing, lay out your financial goals, and don't rush to make a fortune. Taking the time to learn about investing and carefully making the right choices for you should allow you to generate a tidy return.

Jeremy J. Siegel. "Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies." McGraw-Hill Education, 2014.

International Journal of Economics and Management. " BB&K Five-Way Model and Investment Behavior of Individual Investors: Evidence from India ," Page 117-119.

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Essay on investment.

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After reading this essay you will learn about Investment:- 1. Meaning of Investment 2. Importance of Investment 3. Factors Favourable 4. Investment Media.

Essay on the Meaning of Investment:

Investment is the employment of funds with the aim of achieving additional income or growth in value. The essential quality of an investment is that, it involves ‘waiting’ for a reward. It involves the commitment of resources which have been saved or put away from current consumption in the hope that some benefits will accrue in future. The term ‘Investment’ does not appear to be as simple as it has been defined.

Investment has been categorized by financial experts and economists. It has also often been confused with the term speculation. The following discussion will give an explanation of the various ways in which investment is related or differentiated from the financial and economic sense and how speculation differs from investment. It must be clearly established that investment involves long-term commitment.

Financial and Economic Meaning of Investment :

Investment is the allocation of monetary resources to assets that are expected to yield some gain or positive return over a given period of time. These assets range from safe investments to risky investments. Investments in this form are also called ‘Financial Investments’.

From the point of view of people who invest their funds, they are the suppliers of ‘Capital’ and in their view, investment is a commitment of a person’s funds to derive future income in the form of interest, dividends, rent, premiums, pension benefits or the appreciation of the value of their principal capital.

To the financial investor, it is not important whether money is invested for a productive use or for the purchase of second hand instruments such as existing shares and stocks listed on the stock exchanges. Most investments are considered to be transfers of financial assets from one person to another.

The nature of investment in the financial sense differs from its use in the economic sense. To the economist, ‘Investment’ means the net additions to the economy’s capital stock which consists of goods and service that are used in the production of other goods and services.

The term investment implies the formation of new and productive capital in the form of new construction, new producers’ durable equipment such as plant and equipment. Inventories and human capital are included in the economist’s definition of investment.

The financial and economic meaning of investment are related to each other because investment is a part of the savings of individuals which flow into the capital market either directly or through institutions, divided in ‘new’ and second hand capital financing.

Investors as ‘suppliers’ and investor as ‘users’ of long-term funds find a meeting place in the market. In this book, however, investment will be used in its ‘financial sense’ and investment will include those instruments and institutional media into which savings are placed.

Essay on the Importance of Investment:

Investments are both important and useful in the context of present-day conditions.

Some factors that have made investment decisions increasingly important are:

Longer life expectancy or planning for retirement, increasing rates of taxation, high interest rates, high rate of inflation, larger incomes and availability of a complex number of investment outlets.

a. Longer Life Expectancy :

Investment decisions have become significant as people retire between the age of 60 and 65. Also, the trend shows longer life expectancy. The earnings from employment should be calculated in such a manner that a portion is put away as savings. Savings by themselves do not increase wealth; these must be invested in such a way that the principal and income will be adequate for a greater number of retirement years.

The importance of investment decisions is enhanced by the fact that there is an increasing number of women are working in organizations.

Men and women will be responsible for planning their own investments during their working life so that after retirement they are able to have a stable income. Increase in the working population, proper planning for life span and longevity have ensured the need for balanced investments.

b. Taxation :

Taxation is one of crucial factors in any country which introduces an element of compulsion in a person’s savings. There are various forms of savings outlets in our country in the form of investments which help in bringing down the tax level. These are discussed under availability of investment media.

c. Interest Rates :

The level of interest rates is another aspect which is necessary for a sound investment plan. Interest rates vary between one investment and another. These may vary between risky and safe investments; they may also differ due to different benefit schemes offered by the investments.

These aspects must be considered before allocating any amount in investments. A high rate of interest may not be the only factor favouring the outlet for investment. The investor has to include in his portfolio several kinds of investments.

He/she must maintain a portfolio with high risk and high return as well as low risk and low return. Stability of interest is as important as receiving a high rate of interest. This book is concerned with determining that the investor is getting an acceptable return commensurate with the risks that are taken.

d. Inflation :

Every developing economy is phased with the problem of rising prices and inflationary trends. In India, inflation has become a continuous problem since the last decade. In these years of rising prices, several problems are associated coupled with a falling standard of living. Before funds are invested, erosion of the resources will have to be carefully considered in order to make the right choice of investments.

The investor will try and search an outlet which will give him a high rate of return in the form of interest to cover any decrease due to inflation. He will also have to judge whether the interest or return will be continuous or there is a likelihood or irregularly.

Coupled with high rates of interest, he/she will have to find an outlet which will ensure safety of principal. Besides high rate of interest and safety of principal, an investor has to always bear in mind the taxation angle. The interest earned through investment should not unduly increase his taxation burden. Otherwise, the benefit derived from interest will be reduced by an increase in taxation.

e. Income :

Investment decisions have assumed importance due the general increase in employment opportunities in India. The stages of development in the country have accelerated demand and a number of new organizations and services have increased.

Jobs are available in new sectors like software technology; business processing offices, call centers, exports, media, tourism, hospitality, manufacturing sector, banks, insurance and financial services. The employment opportunities gave rise to increasing incomes.

More incomes have increased a demand for investments in order to bring in more income above their regular income. The different avenues of investments can be selected to support the regular income. Awareness of financial assets and real assets has led to the ability and willingness of working people to save and invest their funds for return in their lean period leading to the importance of investments.

Thus, the objectives of investment are to achieve a good rate of return in the future, reducing risk to get a good return, liquidity in time of emergencies, safety of funds by selecting the right avenues of investments and a hedge against inflation.

Essay on the Factors Favourable for I nvestment:

The investment market should have a favourable environment to be able to function effectively. Business activities are marked by social, economic and political considerations. It is important that the economic and political factors are favourable.

Generally, there are four basic considerations which foster growth and bring opportunities for investment. These are legal safeguards, stable currency and existence of financial institutions to aid savings and forms of business organization.

i. Legal Safeguards:

A stable government which frames adequate legal safeguards encourages accumulation of savings and investments. Investors will be willing to invest their funds if they have the assurance of protection of their contractual and property rights.

In India, the investors have the dual advantage of free enterprise and control. Freedom, efficiency and growth are ensured from the competitive forces of private enterprises. Statutory control exerts discipline and curtails some element of freedom. In India, the political climate is conducive to investment since the new economic reforms in 1991 leading to liberalization and globalization.

ii. A Stable Currency:

A well-organized monetary system with definite planning and proper policies is a necessary prerequisite to an investment market. Most of the investments such as bank deposits, life insurance and shares are payable in the currency of the country.

A proper monetary policy will give direction to the investment outlets. As far as possible, the monetary policy should neither promote acute inflationary pressures nor prepare for a deflation model. Neither condition is satisfactory.

Price inflation destroys the purchasing power of investments. Thrift is also penalized when the net interest after taxes received by the investor is less than the rise in the price level, leaving the investor with less total purchasing power than he had at the time of saving.

Inflation occurs generally in unstable conditions like war or floods but in the last decade, it also discernible in peace conditions especially in developing countries because of huge government deficit in creating infrastructure.

Deflation is equally disastrous because the nominal values of inventories, plant and machinery and land and building tend to shrink. An example of the evil effects of deflation can be cited for the period 1929-1933 in the United States when the shrinkage in nominal values came to a point of producing wholesale bankruptcy.

A reasonable stable price level which is produced by wise monetary and fiscal management contributes towards proper control, good government, economic well-being and a well-disciplined growth oriented investment market and protection to the investor.

iii. Existence of Financial Institutions and Services:

The presence of financial institutions and financial services encourage savings, direct them to productive uses and helps the investment market go grow. The financial institutions in existence in India are mutual funds, development banks, commercial banks, life insurance companies, investment companies, investment bankers and mortgage bankers.

The financial services include venture capital, factoring and forfaiting, leasing, hire purchase and consumer finance, housing finance, merchant bankers and portfolio management. Investment bankers are merchants of securities. They buy bonds and stocks of companies for re-sale to investors.

The investment bankers are distinguished from security brokers who act as agents in buying and selling already issued securities for commission. Mortgage bankers sometimes act as merchants and sometimes as agents on mortgage loans generally on residential properties.

They serve as middlemen between investors and borrowers and perform collateral service in connection with loans. Commercial banks and financial institutions also act as mortgage bankers in giving mortgage loans and servicing the loans.

In India, there are a large number of financial institutions under Central Government and State Governments and rural bodies that have encouraged the growth of savings and investment. The Life Insurance Corporation and Unit Trust of India offer a wide variety of schemes for savings and give tax benefits also.

Apart from these, there is a well-organized network of development banks such as the Industrial Development Bank of India (IDBI), Industrial Credit Investment Corporation of India (ICICI) and Industrial Finance Corporation of India (IFCI).

At the state level, there are State Financial Corporation, for rural areas and agriculture, the National Bank of Agriculture and Rural Development (NABARD). These financial institutions and development banks offer a wide variety of policies for encouraging savings and investment. These institutions lend an element of strength to the capital market and promote discipline while encouraging growth.

Since 1991, there has been a development of the private corporate sector. Many new financial institutions have emerged in the private sector. Insurance companies, mutual funds and venture capitalists leasing companies have been opened up to private financing agencies.

Foreign banks have been allowed to do business. Thus, there is the presence of a large number of institutions and services which channel the funds in productive directions.

iv. Form of Business Organization :

The form of business organization which is permanent in existence aides savings and investment. The public limited companies have been said to be the best form of organization. The three characteristics of the corporation which have been very useful for investors are limited liability of shareholders, perpetual life and transferability and divisibility of stocks and shares.

The public limited company with the ability to continue its business irrespective of members comprising it, gives longevity and soundness to its business activity.

In contrast to a public limited company whose shareholders have limited liability, the sole proprietor or a partner in a partnership firm is liable for all the debts of the firm to the full extent of his personal wealth. In these conditions, investors are hesitant to risk their savings in these forms of organizations.

Besides unlimited liability, the partnership and proprietor also suffer from short life of the organization. With the death or retirement of any of the partners, a partnership firm is dissolved. Similarly, a sole proprietor carries on business only during his lifetime.

In these unstable and unsure conditions, investors would not like to make their investments. Finally, the public limited company lends an element of liquidity to its shares. In contrast, partnership restricts stability and transferability freely from person to person. The public limited company, therefore, is a popular form for investment as the investors benefit from liquidity, convenience and longevity.

In India since 1991, there is the existence of large corporate organizations. There have been many mergers and amalgamations and consolidation has taken place.

Business has become more permanent in nature. Family businesses have expanded and are now stable and well organized. Indian business is taking new forms and being recognized in the world. With increased awareness and stability, the investor has many favourable outlets for making investments.

v. Choice of Investment :

The growth and development of the country leading to greater economic activity has led to the introduction of a vast array of investment outlets. Apart from putting aside savings in savings banks where interest is low, investors have the choice of a variety of instruments. The question to reason out is which is the most suitable channel? Which media will give a balanced growth and stability of return?

The investor in his choice of investment will have to try and achieve a proper mix between high rate of return and stability of return to reap the benefits of both. Some of the instruments available are equity shares and bonds, provident fund, life insurance, fixed deposits and mutual funds schemes.

vi. Risk-Less Vs. Risky Investments :

Most investors are risk averse but they expect maximum return from their investment. Every investment must be analysed because there is definitely some risk in it. The Indian investment scene has many schemes to offer to an individual. On an analysis of these schemes, it appears that the investor has a wide choice.

A vast range of investments is in the government sector. These are mostly risk free but low return yielding. Several incentives are attached to it. The private sector investments consist of equity and preference shares, debentures and public deposits with companies. These have the features of high risk. Ultimately, the investor must make his investment decisions.

The dilemma faced by the Indian investor is the reconciliation of profitability, liquidity and risk of investments. Government securities are risk free and the investor is secured.

However, to him the return or yield is very important as he has limited resources and would like to plan an appreciation of the investments for his future requirements. Government securities give low returns, and do not fulfil his objective of money appreciation.

Private sector securities are attractive though, risky. The success stories of Reliance, Infosys, Wipro give to the investor the dream of future appreciation of investment by several times.

The multinational and blue chip companies offer very high rates of return and also give bonus shares to their shareholders. Food Specialties Limited, Cadburys, Colgate Palmolive, Hero-Honda have been known to raise the hopes of investors by giving high rates of return.

Real Estate and Gold have the advantage of eliminating the impact of inflation, since the price rises experienced by them have been very high. The Indian investor in this context cannot choose his investments very easily.

An investor can maximize returns with minimum risk involved if he carefully analyses the information published in the prospectuses of private companies. Contents as the past performance, name of Promoters and Board of Directors, the main activities, its business prospects and selling arrangements should be assessed before the investor decides to invest in the company.

From the point of view of an investor, convertible bonds, may under proper conditions, prove an ideal combination of high yield, low risk and potential of capital appreciation.

If private companies would offer a wider range of investments to the public, they would be able to mobilize a larger part of pubic savings and at the same time, the investor would be enabled to make a better choice. This would solve his dilemma of being at the crossroads.

Investment Media :

In India, many types of investment media or channels are available for making investments. A sound investment program can be constructed if the investor familiarizes himself with the various alternative investments available.

Investment media are of several kinds. Some are simple and direct, others present complex problems of analysis and investigations. Some are familiar; others are relatively new and unidentified. Some investments are appropriate for one type of investor and another may be suitable to another person.

The ultimate objective of the investor is to derive a variety of investments that meet this preference for risk and expected return. The investor will select the portfolio which will maximize his utility. Securities present a wide range of risk-free instruments to highly speculative shares and debentures. From this broad spectrum, the investor will have to select those securities that maximize his utility.

The investor, in other words, has a optimization problem. He has to choose the security which will maximize his expected returns subject to certain considerations. The investment decision is of optimizing returns but risk taking capacity varies from investor to investor.

It is not only the construction of a portfolio that will promise the highest expected return but it is the satisfaction of the need of the investor. For instance, one investor may face a situation when he requires extreme liquidity.

He may also require safety of securities. Therefore, he will have to choose a security with low returns. Another investor would not mind high risk because he does not have financial problems but he would like a high return. Such an investor can put his savings in growth shares as he is willing to accept risk. Another important consideration is the temperament and psychology of the investor.

Some investors are temperamentally suited to take risks; there are others who are not willing to invest in risky securities even if the return is high. One investor may prefer safe government bonds whereas another may be willing to invest in blue chip equity shares of a company. Many alternative investments exist. These can be put into different categories. The investment alternatives are given below in Table 1.3.

a. Direct and Indirect Investments :

These media alternatives have basically been categorized as direct and indirect investment alternatives. Direct investments are those where the individual makes his own choice and investment decision. Indirect investments are those in which the individual has no direct hold on the amount he invests.

He contributes his savings to certain organizations like Life Insurance Corporation (LIC) or Unit Trust of India (UTI) and depends upon them to make investments on his and other people’s behalf. So there is no direct responsibility or hold on the securities.

An individual also makes indirect investment for retirement benefits, in the form of provident funds and pension, life insurance policy, investment company securities and securities of mutual funds. Individuals have no control over these investments. They are entrusted to the care of the particular organization.

The organizations like Life Insurance Corporation or Unit Trust of India, provident funds are managed according to their investment policy by a group of trustees on behalf of the investor.

The examples of indirect investment alternatives are an important and rapidly growing segment of our economy. In choosing specific investments, investor will need definite ideas regarding a number of features that their portfolio should have.

b. Fixed and Variable Principal Securities :

Fixed principal investments are those whose principal amount and the terminal value are known with certainty. Cash has a definite and constant rupee value, whether it is deposited in a bank or kept in a cash box. It does not earn any return.

Savings accounts have a fixed return; they differ only in terms of time period. The principal amount is fixed plus interest earned. Savings certificates are quite recent some examples being national savings certificates, bank savings certificates and postal savings certificates. Government bonds, corporate bonds and debentures are sold having a fixed maturity value and a fixed rate of income over time.

The variable principal securities differ from the fixed principal securities because their terminal values are not known with certainty. The price of preference shares is determined by demand and supply forces even though preference shareholders have a fixed return.

Equity shares also have no fixed return or maturity date. Convertible securities such as convertible debentures or preference shares can convert themselves into equity shares according to certain prescribed conditions and thus have features of fixed principal securities supplemented by the possibility of a variable terminal value.

Debentures, preference shares and equity shares are examples of securities sold by corporations to investors to raise necessary funds.

c. Non-Security Investments :

‘Non-Security Investments’ differ from securities in other categories. Real estate may be the ownership of a single home or include residential and commercial properties.

The terminal value of real estate is uncertain but generally there is a price appreciation, whereas depreciation can be claimed in tax. Real estate is less liquid than corporate securities. Mortgages represent the financing of real estate. It has a periodic fixed income and the principal is recovered at a stated maturity date.

Commodities are bought and sold in spot markets; contracts to buy and sell commodities at a future date are traded in future markets. Business ventures refer to direct ownership investments in new or growing business before firms sell securities on a public basis. Art, antiques and other valuables such as silver, fine china and jewels are also another type of specialized investments which offer aesthetic qualities also.

These features should be consistent with the investors’ objectives and in addition should have additional conveniences and advantages. The following features are suggested for a successful selection of investments.

Difference between Investment and Speculation
What are the Various Risk Involved in Investment?

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Latest Update 20 Jan, 2024

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Assessment of growing cash flows after tax

The growing cash flows forecast by companies are made up of four elements:, discount rate assessment, calculation of net present value, decision criteria, project analysis, sensitivity analysis, neutral analysis, scenario analysis, criteria for the alternative decision, simple recovery and expected recovery, however, this rule has two major drawbacks:, internal rate of return, profitability index, accounting measures, extension of the limits of the capital budgeting criteria.

Company managers continually target tangible and intangible assets, which can increase their business value and, in turn, lead to an increase in shareholders' assets. Capital budgeting focuses on identifying and evaluating possible investment opportunities that would allow managers to make the right investment decisions.

The concept of present value (PV) and net present value (NPV) form the basis for the valuation of tangible assets and investment decisions. In this section, we must use these concepts as managerial decision instruments, which are widely used by companies for the analysis of tangible goods, the recovery of which is spread over several installments. This method establishes, above all, a comparison between the cost of an investment and the present value of the uncertain future cash flows generated by the project.

There are (at least) 4 steps for analyzing the expected cash flow of a proposed project:

Assuming that the project is entirely financed by actions (that is to say that the shareholders provide the required capital), this would require the establishment of forecasts relating to the forecast increasing cash flows for the shareholders if the project is accepted.
It is necessary to establish an appropriate discount rate to reflect the present value and the risks of the project. It will thus be used for the calculation of the present value of the forecast cash flows.
The NPV of the project must be calculated based on the added value of the current values.
A decision must be made as to whether to continue the project or abandon it.

Before starting to develop the actual project cash flow model and moving on to the forecast exercise, important technical decisions need to be made. The analyst is called upon to decide what to do to manage inflation . The cash flow model can be established in current or constant currency (that is, net of inflation). These two approaches have advantages and disadvantages in terms of practical aspects, but this essential element must be uniform throughout the model. Next, choose an appropriate forecast period. This can be easy in some cases because the economic life of the assets in question is known. But in other cases, an arbitrary decision would be necessary.

The cash flow generated from operations (the cash flow to be generated, through sales, fewer expenses relating to the operation of the project).
The cash flow generated from capital investments and disposals.
Cash flow results from changes in working capital (net changes in short-term assets and liabilities).
These are the payments of additional corporate taxes that result from the implementation of the project.

If the project does not monitor operations after the end of the forecast period, it is then necessary to assess the residual value of the assets. If the management plans a longer duration of the project, it would, therefore, be useful to set a deferral value of the project. The residual value or the carry-over value and their tax implications are then introduced into the valuation model as the last forecast cash-inflow of the project.

The concept of present value includes the concept of the opportunity cost of capital. The appropriate discount rate, or cost of capital, must first compensate the shareholders for the profit they could make on the capital market, by investing in risk-free assets. It must also offer them compensation for the risk they incur by investing in this project rather than in a risk-free financial asset. This is why the cost of capital is determined by the rate of return that the investor intends to make from an alternative investment with a similar risk profile. Fortunately, the wide range of financial assets marketed allows managers to assess the exact rate.

Calculating an NPV of a project is only a technical operation, once the managers have established the cash flow forecasts and the appropriate discount rate. All future cash flows should be discounted to arrive at their present value. In addition, the NPV of the project is carried out by adding these cash flows with the present value of the expenditure required. The projected cash flow of the project in period (t) is represented by (Ct), the present value of the investment required by (Co) (which has a negative sign), and the discount rate by (r).

Note that this traditional NPV model assumes that all future cash flows can be discounted with the same discount rate, which could be very restrictive for certain projects. However, this model can adapt to discount rates that vary from one period to another and to cash flow profiles that show more than one change in sign.

The following decision criteria are relatively straightforward since it is based on the analysis of the project's financial profitability. Assuming that the company operates in a capital market environment where access to capital is not limited, management should accept all projects with positive net present values and optimize its value.

Project analysis methods are widely used. On the one hand, they allow managers to have an in-depth vision and a better understanding of the financial aspects of investment projects. On the other hand, and they highlight the assumptions arising from the cash flow forecasts. They can also give managers more confidence in the analysis of profitability and determine the main risk factors that may compromise the expected result of the investment.

Sensitivity analysis is a very useful way to identify the main variables or guideline values of projects. She directs managerial attention to the most important elements, which are at the origin of the project's growing forecast cash flows.

The magnitude of the change in net present value demonstrates the project's sensitivity to this specific fundamental variable. If, for example, the NPV turns out to be more sensitive to the company's market share and the number of fixed costs than the price of the product, management should. In this case, be interested in the reliability of the market share estimates and fixed cost forecasts. Therefore, he must focus his efforts on setting up the project to improve these factors.

The analysis is slightly more complex. It determines the critical value of each fundamental variable: the NPV of the project equals zero. The above example indicates that as soon as the product's market shares drop or the number of fixed costs. It is called breakeven market share, or fixed breakeven cost exceeds a certain level, the business begins to lose money on the project. The concept of financial breakeven for investment projects is concerned with the recovery of the opportunity cost of the project, as opposed to the accounting analysis of breakeven, which mainly looks at historical costs.

The previous two project analysis methods look at the fundamental factors separately and consider them to be unrelated. Nevertheless, companies often find that many market events will result in a change of several fundamental variables at the same time. If, for example, you are threatened by a new competitor entering the current market, the company's market share and the price could decline. Scenario analysis allows management to examine the effect of possible future event scenarios, which are reflected in the DCF assessment model by uniform changes in the different combinations of the fundamental variables.

Companies of all sizes and in all industries have long used a large number of decision-making criteria to assess their capital investment projects, as a supplement, or worse still, as a substitute for the NPV rule. Let's summarize how these criteria work and compare them to the NPV.

A simple payback period for a project is defined by the expected number of years that a business requires to recover the initial investment expenses by putting the project in place. The decision criterion is thus presented by the maximum number of years, or by the deadline, from which the proposals on capital investment must be rejected. This implies that the shorter the recovery period, the better the project will be.

First, it fails to determine the present value of the currency. No investor would accept to invest $ 100 today and receive exactly the same amount the year after and nothing more after that, although this investment is for a payback period of one year.
Second, the rule excludes the forecast cash flows of the project after the deadline period. It favors projects that have significant recoveries during the first years and maybe nothing after, to long-term projects that gradually increase positive cash flows.

Businesses often use the expected recovery rule to correct the neglect of the present value of the currency. This method includes calculating the recovery period relative to the present value of future cash flows from the project. However, the rule still gives no importance to cash flows after the arbitrary deadline.

Thus, its use should be limited to the comparison of projects which have very similar cash flow profiles. For example, in the real estate sector, many investments should yield a uniformly distributed rent over the long term.

The internal rate of return (IRR) for a project is defined by the discount rate, which has an NPV of the project = 0.

For almost all projects, the TIR rule gives the same answer to the question of its acceptance or rejection. However, the use of TIR is inappropriate, for other projects, or needs to be used with great care. These exemptions relate to projects where, instead of an initial investment, the cash flow changes sign more than once during the forecast period or when the company classifies mutually exclusive projects due to technical or capital constraints.

The profitability index of a project is defined by the ratio between the present value of the project's future cash flows and the initial investment (where Co is assumed to be negative).

The rule says that any project with a profitability index greater than one must be accepted, which is analogous to the result of applying the NPV rule, since if IR> I, this means that VA> -Co, and therefore NPV> 0. However, the profitability index is not necessary for reciprocally exclusive project rankings since it is concerned with profitability, not with the size of projects.

Many accounting measures are used in the decision-making process for investment, such as return on investment (ROI) or (Return on Investment) or the average accounting profitability of an investment. The major problem with these measures lies in the fact that they are based on book values , which are very often subject to the arbitrary selection of accounting measures (Example: depreciation programs).

In addition, book values and book income do not reflect the present value of the currency. This is why it is necessary to make several adjustments to achieve significant results.

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As already mentioned, the assumptions fundamental to profitability analysis represent a static approach to decision making and can be very restrictive in some cases. The renewal of future uncertain cash flows by their forecast value and the use of a single discount rate does not take into account any managerial activities during the life of the project.

For example, Managers are taking steps to mitigate losses from adverse market events. These measures maintain or increase profits from favorable changes. Consequence: this can change the risk profile of the project. Also, the profitability analysis is based on making a decision instantly or never. It does not take into account the opportunity that managers can take to delay certain strategic decisions while awaiting the results of future events.

To circumvent these drawbacks, several steps have been taken to develop more sophisticated decision criteria and investment analysis methods. These include genealogical analysis, the use of certainty equivalent to cash flows, and the application of the option price theory in the valuation of tangible goods.

Most investment decisions are based on present value (VA) and net present value (NPV). These are used to make a comparison between the cost of an investment and the present value of future uncertain cash flows that are generated by the project. At least four steps are included:

Forecasting growing cash flows (which would require some technical decisions such as how to manage inflation).
The assessment of the appropriate discount rate or cost of capital (determined by the rate of return that the investor could predict from another investment with a similar risk profile).
The use of this information to calculate the net present value.
The decision on the possibility of continuing the project.

A better understanding can be provided by the analysis of the sensitivity and the analysis of the neutral point and the scenario analysis. The other investment decision criteria include simple recovery and expected recovery, internal rate of return, and the profitability index.

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ESG Investing Related Cards

Climate and Net-Zero Solutions

MSCI offers a suite of tools to help institutional investors benchmark, measure and manage portfolio exposure to climate risk, identify low carbon investment opportunities, and support investors seeking to set a net-zero target.

Sustainable Finance

ESG and climate regulation and disclosure resource center for institutional investors, managers and advisors.

ESG Funds in Focus

We bring focus to more than 52,000 funds through ratings, research and insights into the latest ESG trends driving risk and opportunities.

ESG and Climate Guide for Advisers

Advisers with the knowledge and tools to understand the nuances of ESG and Climate investing and position client portfolios accordingly can deliver additional value to clients and strengthen relationships.

ESG Investing footnotes

MSCI ESG Research LLC. is a Registered Investment Adviser under the Investment Adviser Act of 1940. The most recent SEC Form ADV filing, including Form ADV Part 2A, is available on the U.S. SEC’s website at www.adviserinfo.sec.gov (opens in a new tab) .

MIFID2/MIFIR notice: MSCI ESG Research LLC does not distribute or act as an intermediary for financial instruments or structured deposits, nor does it deal on its own account, provide execution services for others or manage client accounts. No MSCI ESG Research product or service supports, promotes or is intended to support or promote any such activity. MSCI ESG Research is an independent provider of ESG data, reports and ratings based on published methodologies and available to clients on a subscription basis.

ESG ADV 2A (PDF, 355 KB) (opens in a new tab) ESG ADV 2B (brochure supplement) (PDF, 232 KB) (opens in a new tab)

1 Through our legacy companies KLD, Innovest, IRRC, and GMI Ratings. ESG and climate data, research and ratings are produced by MSCI ESG Research LLC and are used as an input to the MSCI ESG indexes, calculated by MSCI, Inc.

2 MSCI KLD 400 Index https://www.msci.com/msci-kld-400-social-index

3 Origins of MSCI ESG Ratings established in 1999. Produced time series data since 2007.

4 MSCI ESG Research LLC clients

5 The Extel & SRI Connect Independent Research in Responsible Investment (IRRI) Survey – 2015, 2016, 2017 & 2018/19

6 Deep Data Delivery Standard http://www.deepdata.ai/

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IMAGES

Ukessays.com foreign direct investment decision in dell finance essay
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Ukessays.com foreign direct investment decision in dell finance essay
⇉Fundamental Investment Decisions Essay Example
Three Major Financial Decisions- Investment, Financing and Dividend
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COMMENTS

Investment Decisions in Corporations
The purpose of this paper is to provide an explanation of how the majority of corporations make specific investment decisions to add to their profitability and competitive advantage. We will write a custom essay on your topic. The first step in the decision-making process related to investing in the analysis of a current situation with the help ...
(PDF) Investment Decision Making and Risk
2009) Investment decisions are made after a complete analysis of the investment project. One of the basic factors. that influence the decision is the risk factor of the investme nt. This risk ...
Investment Intention and Decision Making: A Systematic Literature
individual investment decisions, particularly under risk and uncertainty conditions. In. ... proceedings, conceptual papers. Language English Non-English. Timeline 2016-May 2021 <2016.
Making Smart Investments: A Beginner's Guide
Making Smart Investments: A Beginner's Guide. Reduce the risk factor, increase the reward factor, and generate meaningful returns. If you make smart decisions and invest in the right places, you ...
(PDF) Understanding Investments: Theories and Strategies
2 e investment decision process and investment strategies 31. 2.1 Introduction 32. 2.2 The investment process 32. 2.2.1 The investor policy statement 32. 2.2.2 The risk-return trade-off 33.
Investment Decision Essays (8 Top Tips)
In the landscape of investment decision essays, clarity in articulating the investment thesis stands as a cornerstone among the Elements of Well-Written Investment Decision Essays. A clear and concise investment thesis serves as the guiding principle that underpins the entire essay, providing a roadmap for readers to comprehend the rationale ...
Corporate Investment Decision: A Review of Literature
This study is an attempt to review relevant literature on the theme of corporate real investment decisions. We have conducted a comprehensive survey of literature on the studies published in well-reputed journals of finance, i.e., The Journal of Finance, The Review of Financial Studies, and The Journal of Financial Economics, during the years 2010 to 2022. The theoretical analysis reveals that ...
Investment Thesis: An Argument in Support of Investing Decisions
Investment Thesis: An investment thesis is the beliefs that investors decide to use when determining what investments to purchase or sell, when to take an action and why. An investment thesis ...
Investment Decisions
2. Project Evaluation ' Investment Criteria. Effective investment decision making is essential to corporate survival and long-term success. These decisions help to mould company's future opportunities and develop competitive advantage by influencing, among other things, its technology, its processes, its working practices and its profitability.
Investment Decision Essay Examples
Investment Decision: Poland vs. Greece. Introduction Incisive investment decisions focus on understanding risks and rewards in a global landscape shaped by economic intricacies (Maris, 2022). As the CEO entrusted with choosing between a £100 million investment in Poland and Greece, this analysis explores the distinctive risk profiles of each ...
Deciphering Capital Budgeting: A Guide to Strategic Investment Decision
Essay Example: Capital budgeting is an essential financial planning procedure that is necessary for any firm that wants to grow and succeed. Businesses are able to weigh the advantages and disadvantages of major investment possibilities by using this form of financial assessment. ... Each investment decision necessarily foregoes alternative ...
7 Steps to a Successful Investment Journey
Adventurer - volatile, entrepreneurial, and strong-willed. Celebrity - a follower of the latest investment fads. Guardian - highly risk-averse, wealth preserver. Straight Arrow - shares ...
Investment Decision-Making Essay Examples
Abstract This study investigates how technological advancements have impacted the investment decision-making process by comparing human-led approaches and those driven by machines. Technological advancements are transforming how people make choices during the decision-making process. There is a need to explore the ethical implications of using ...
Full article: Behavioral finance factors and investment decisions: A
The measurement of behavioral finance factors and investment decisions in this study was informed by previous researches that utilized similar questions to assess the variables of interest. The investment decision questions were adapted from Almansour and Arabyat (Citation 2017), Khawaja and Alharbi (Citation 2021) and Liang and Reiner ...
Navigating Investment Dynamics: Decisions, Risks, and Market Trends
Views. 271. Investment is the employment of funds in assets with the expectation of earning additional income. Investment is the sacrifice of certain present value for an uncertain future reward. It entails arriving at a number of decisions such as type, mix, quantity, timing and quality of investment and disinvestments.
(Pdf) an Impact of Behavioural Finance on Investment Decisions: an
Design/Methodology/Approach: The study used a literature review method understanding the heuristics and biases central to behavioural finance and advocacy to make investment decisions. The paper ...
Investment Decision Process
This decision will determine the amount needed for investment and financial allocations. It may coat the organization a lot of poorly done without considering all factors. The approach chosen by the organization is determined by factors such as time, financial capability, and whether the investment is corporate or individual.
Essay on Investment
Investment Media. Essay on the Meaning of Investment: Investment is the employment of funds with the aim of achieving additional income or growth in value. The essential quality of an investment is that, it involves 'waiting' for a reward. ... Investment decisions have assumed importance due the general increase in employment opportunities ...
Tools for investment decision making
The decision on the possibility of continuing the project. A better understanding can be provided by the analysis of the sensitivity and the analysis of the neutral point and the scenario analysis. The other investment decision criteria include simple recovery and expected recovery, internal rate of return, and the profitability index.
Sustainability
The opacity of the impact investment decision-making process is one of the main constraints hampering further growth in the impact investing ecosystem. This paper takes a differentiated view on why (investment motivation) and how (investment decision criteria) the major private impact investor types allocate funding to investees. We incorporate insights from 34 interviews with the five major ...
Investment Decision Process Essay Examples
Investment Decision Process. Before investing in either real estate or opening a minimart within the city corners, investors have always been in the valley of decision; the process of decision-making can either take long or short depending on which it has been approached the team used. Some of the most common methods used and tried are top-down ...
Sustainable Investing
Sustainable investing at MSCI began in 1988. 1 Our first ESG index was launched in 1990. 2 We've been rating companies based on industry material environmental, social and governance risks since 1999. 3. We're proud to work with over 3,000 clients worldwide including leading pension funds, asset managers, consultants, advisers, banks and ...