Investment decisions are the decisions regarding the application of funds raised by the organisation. The investment decisions relate to the selection of the assets in which the funds should be invested.

The assets in which the fund can be invested are basically of two types:

a.    Fixed assets – fixed assets indicate the infrastructural facilities and properties required by the organisation. Fixed assets are the assets which bring the returns to the organisation over a longer span of time. The investment decisions in these types of assets are technically referred to as “Capital Budgeting Decisions”. Capital Budgeting Decisions are concerned with the answers to the questions like:

1.    How the fixed assets or proposals or projects should be selected to make the investment in? what are the various methods available to evaluate the investment proposals in the fixed assets?

2.    How the decisions regarding the investment in fixed assets or proposal or projects should be made in the situations o frisk and uncertainty?


b.    Current assests – current assets are the assets which get generated during the course of operations and are capable of getting utilized within a short span of time of one year. Current assets keep on charging the form and shape very frequently. The investment decisions in these types of capital assets are technically referred to as “Working Capital Management.” Working capital management decisions are concerned with the answers to the questions like –

1. What is the meaning of working capital management? What are the objectives of working capital management?
2. What the need for working capital arises?
3. What are the factors affecting the requirement of working capital?
4. How to quantify the requirement of working capital?
5. What are the sources available for financing the requirement of working capital?
6. Working capital management is concerned with the management of current assets on overall basis as well as on individual basis. In practical situation current assets may be found in the form of cash and bank balances, receivables and inventory. Working capital management is concerned with the management of these individual components of current assets as well.

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