JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY

KAKINADA

SCHOOL OF MANAGEMENT STUDIES

FINANCIAL MANAGEMENT
NATURE OF INVESTMENT DECISIONS
Presented by
V VINAY CHANDRA
19021E0065
 DEFINITION
• Investment decisions concerned with the allocation of funds into
different investment opportunities for the purpose of earning the
highest possible return.
• These decisions are taken by the investor or top-level managers who
properly analyses each opportunity before investing any fund into
them.
• Investment decisions are crucial decisions for every organization as
it determines its profitability.
 NATURE OF INVESTMENT DECISIONS
• Require Huge Funds: Investment decisions requires a large
amount of funds to be deployed by firm for earning profits. Every
firm should necessarily plan its investment programs and control its
expenditures.
• High Degree of Risk: These decisions involve a high amount of
risk as they are taken on the basis of estimated return. Large funds
are invested for earning income in future which is totally uncertain.
• Irreversibility: Decisions related to investment are mostly
irreversible in nature.
 NATURE OF INVESTMENT DECISIONS
• Long Term Effect: Investment decisions have a long lasting effects
on future profitability and growth of firm. These decisions decide
the position of a firm in future.
• Impacts Cost Structure: Investment decisions widely impacts the
cost structure of an organization. Firms by taking these decisions
commit themselves to various fixed cost such as interest, rent,
insurance, supervision etc. for the sake of earning profits.
 NATURE OF INVESTMENT DECISIONS
• Long term Commitment of Funds: Funds are deployed for a
longer term by organizations through these decisions. Financial risk
in investment decisions increases due to long term commitment of
funds.
• Complexity: Investment decision are most complex decisions as
they are based on future events which is totally uncertain. Future
cash flows of an investment cannot be estimated accurately as they
are influenced by changes in economic, social, political and
technological factors.
THANK YOU