Investment Flashcards
0
Q
What is depreciation
A
The drop in value of something you have invested in.
1
Q
Define investment
A
The addition to capital stock (i.e. Firms investing in machinery)
This is usually a physical investment but can also be financial.
2
Q
How do we calculate depreciation?
A
Price
———–
Lifetime
3
Q
What are the main determinants of investment?
A
- Retained profit if the business
- Payback time
- Inflation (if higher, borrow money to source investments)
- Expectations
- Interest rates (most business’ borrow money to source investments)
- Opportunity cost
- Risk & return
- Costs (government subsidies get rid of these)
- State of the economy (a growing economy sees greater investment)
