The main aim of shareholder holders when making or deciding on capital investment is wealth maximization by purchasing non current asset which can yield profits. The managers of organization are supposed to be in a position to evaluate a project before committing their funds in it to know which venture would result to a positive cash flow when there are constraints in resources. So project investment capital is a sensitive issue as it determines the firm viability.
A business should be able to know and identify the sources of funds available to them. These sources can angel investors, loan from friends and families, loans from bank, financial institutions, money from venture capitalist and equity investors.
The top level or strategic level management are expected to decide and choose the project that maximize their business value and will subsequently lead to growth of business. There are though several limitation faced by capital investors which include the available resources which a business has, is limited leading to a restraints in a firms choice of project to invest in. In these case a firm has not choice rather than to invest in short term projects which require relatively small funds to start.
A business can also borrow fund from banks, get government grants, equity investors, issue of debentures and bonds, asset investors, other financial institutions and angel investors. When a business debt is increased, the debt to equity ratio of the business also increases making it difficult for a firm to borrow more funds. The advantage of debt financing is that the interest on debt is an allowable expense to a firm.
Shareholders will go for ventures that maximize their wealth. The shareholders will take up ventures which will result to growth of the company in the future. But the overall goal is to take up projects that will add value to the firm.
There are many asset investment projects and include investment in new markets or products. New asset venture is necessary for the expansion and growth of the company. A company growth is also very important to the economy as it results to more jobs being created and also more revenue to the government.
Capital decisions involve a process so that one can use to reach to an accurate conclusion, the process start with project identification, then defining project, screen, implementation, monitoring and carrying out post audit.
The cost benefit analysis is very vital for a project it requires long term estimation of cost and benefit. Taking an example of a typical capital venture which involves acquisition of a fixed asset, the asset has it estimate useful life during which it will be used to maximize on sales revenues while reducing cost of operation. After the asset useful life has elapsed, the asset can either have a residue or disposal value and it can be sold to fetch some funds.
The investing organization is greater than investment project in question, the investment will not change the business previous activities, it does not change organization capital structure and finally that lenders of funds will not change their lending rates.
A business should be able to know and identify the sources of funds available to them. These sources can angel investors, loan from friends and families, loans from bank, financial institutions, money from venture capitalist and equity investors.
The top level or strategic level management are expected to decide and choose the project that maximize their business value and will subsequently lead to growth of business. There are though several limitation faced by capital investors which include the available resources which a business has, is limited leading to a restraints in a firms choice of project to invest in. In these case a firm has not choice rather than to invest in short term projects which require relatively small funds to start.
A business can also borrow fund from banks, get government grants, equity investors, issue of debentures and bonds, asset investors, other financial institutions and angel investors. When a business debt is increased, the debt to equity ratio of the business also increases making it difficult for a firm to borrow more funds. The advantage of debt financing is that the interest on debt is an allowable expense to a firm.
Shareholders will go for ventures that maximize their wealth. The shareholders will take up ventures which will result to growth of the company in the future. But the overall goal is to take up projects that will add value to the firm.
There are many asset investment projects and include investment in new markets or products. New asset venture is necessary for the expansion and growth of the company. A company growth is also very important to the economy as it results to more jobs being created and also more revenue to the government.
Capital decisions involve a process so that one can use to reach to an accurate conclusion, the process start with project identification, then defining project, screen, implementation, monitoring and carrying out post audit.
The cost benefit analysis is very vital for a project it requires long term estimation of cost and benefit. Taking an example of a typical capital venture which involves acquisition of a fixed asset, the asset has it estimate useful life during which it will be used to maximize on sales revenues while reducing cost of operation. After the asset useful life has elapsed, the asset can either have a residue or disposal value and it can be sold to fetch some funds.
The investing organization is greater than investment project in question, the investment will not change the business previous activities, it does not change organization capital structure and finally that lenders of funds will not change their lending rates.
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