What is the importance of capital investments
1. Term: long-term commitment of financial resources in tangible or intangible assets. When making investment decisions, the focus is on the targeted use of the funds raised through the financing. In the balance sheet, the use of funds is shown on the assets side, with investment decisions usually having a direct impact on the amount of fixed assets and additional indirect effects on the amount of current assets. In payment-oriented perspective Every investment project causes deposits and withdrawals at different points in time, whereby the cash flow begins with one or more payments, which are then followed by the returns generated by the project (surplus payments).
2. Species: According to the type of Investment property the following investments can be distinguished:
a) Real or tangible investments (e.g. machines, vehicles),
b) intangible investments (e.g. software, patents),
c) financial investment; (e.g. participations, claims).
Investments can also be made after occasion can be distinguished, whereby the investment reasons often overlap in practice:
a) start-up investment or construction investment,
b) replacement investment,
c) expansion investment,
d) Rationalization investment.
3. Characteristics: Investments are through one high volume in financial resources, through the long term Capital commitment, by a high complexity and diverse Interdependencies characterized for different operational sub-areas. In addition, they are usually not reversible or only reversible at high cost.
4. Assessment of Advantage: Given their characteristics, investments require a structured and careful one Decision making process (Investment planning), the focus of which is the investment calculation. With the help of investment calculation methods, the effects of the investment on the monetary corporate goals (e.g. profitability, increase in value). The impact of an investment on the non monetary goals of the company (e.g. market share growth, social goals, environmental goals) also flow into the investment decision-making process, but outside of the investment calculation.
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