Making Investment Decisions

Question 1

Reasons why businesses invest

Answer 1

1. To replace or renew any assets that have worn out (depreciated) or become obsolescent
2. To introduce additional, new assets in order to meet increased demand for the firms products

Question 2

How investment can help businesses to reach functional objectives

Answer 2

Can help a business to achieve not only its strategic objectives but also comprehensive range of functional objectives.

Question 3

What are the quantitative measures of investment

Answer 3

Payback, average rate of return and net present value

Question 4

Assessing the risks and uncertainties of investment decisions

Answer 4

For ,Amy major projects its difficult for a firm to estimate the anticipated costs and revenue,

Uncertainty that may occur is the market - most appraisals cover a period of years, even in stable markets its difficult to foresee the future

Question 5

Evaluating quantitative and qualitative influences on investment decisions

Answer 5

• level of uncertainty in its financial forecasts

(Qualitative )

1. The aims of the organisation
2. Reliability of the data
3. Risk
4. Personnel
5. The economy
6. Image
7. Subjective criteria