Business Investment
The Current Business Investment Decisions III
The analysis is performed on an incremental basis, that governs investment, costs and therefore that they derive income.
A very important aspect in the analysis of flows, is given by the direct relationship that this new project might have with others that are already in place within the company, ie, a project usually involves cash flows of other investments. This type of effect be incorporated into the computation of the new flow of funds so as not to disturb the normal functioning of other investments.
Investment risk
The future is uncertain, everything that happens around us can change from one moment to another, which is why when making an investment decision must take into account the risk factor.
The investment risk is measured by the variability of possible returns around the mean or expected value of the same, ie, the risk relates to the diversion of the probability function of potential returns.
Every investment risk has two components, one that depends on one’s investment is related to the company and the type of sector in which to invest, this is called diversifiable risk and one that is set by the overall market and affects all investments in the market and is known as non-diversifiable risk.
In making investment decisions, it is possible to minimize the risk if there is a risk diversification efficient and accurate measurement of non-diversifiable. The measure of non-diversifiable risk is given by Beta (B), which links the market returns with those of a particular investment.
An investment with Beta greater than 1 means that a 1% increase in market returns, the asset is increased by a greater proportion of returns and if the Beta is less than 1, the opposite happens.
The contribution that a new investment can make to an efficiently diversified portfolio depends on the Beta which has, since the risk is greater the higher the beta of the assets that comprise it.
The Current Business Investment Decisions II
Cash flows related to investments
When making an investment the company expects to make a series of costs and produce some cost to obtain a series of future benefits, the generation of these costs and profits are known as “flow of funds”, whose components are:
1. Amount and timing of investment
This expresses the amount of initial investment is made in cash payments or credits and their use against fixed assets or working capital.
It should also be taken into account, different additional investments during the life of the project as a result of replacement of equipment, purchase of new technology, increased working capital, for a rough estimate of these expenditures.
2. Amount and timing of returns
This is expressed in what quantity and how long it expects to receive the income generated by the investment made by the company.
Likewise there should be an allocation of resources for investment, is necessary to establish at what time and that amount shall be the recovery of investment.
Most investors shun risk, as they seek to maximize their wealth with minimum risk
The “Cash Flow”, by taking the time value of money, provided substantially on a cash basis after tax.
The Current Business Investment Decisions
Investment policies have given a new perspective to the role of financial management, this has made the topic is of interest to all scholars and lovers of finance
Investment decisions are a major financial decisions, all decisions on business investments ranging from analysis of the investment in working capital such as cash, banks, accounts receivable, inventories and investments represented capital in fixed assets such as buildings, land, machinery, technology etc.
To make the right decisions financier must take into account elements of assessment and analysis as the definition of criteria for analysis, cash flows associated with investments, the risk of investment and required rate of return.
Generally
A higher risk, higher profit
Defining criteria for investment analysis
In most such organizations or private companies, financing decisions are focused or have a clear objective, “the maximization of wealth” through profits, this in the current conditions, should refocus on what constitutes a “maximizing wealth “and the creation of” business value. ”
Faced with this in the investment decisions are resources allocated and results obtained from them, the costs and benefits.
The criteria for analyzing investments make treatment of the benefits and costs of an investment proposal, these benefits and costs in most cases do not occur instantly, but can be generated by shorter or longer periods.
By finding the costs and benefits should clearly define the criteria to be used for evaluation against the investment proposal.
Among the criteria that have achieved a high degree of technical acceptance on the part of financiers, are those who consider the time value of money, making treatment flows discounted costs and benefits. It may be mentioned including the Net Present Value, The Rate of Return, cost-benefit and Internal Rate of Return, which provide the necessary information for investment analysis.
Suggested methodology for the implementation of processes
The steps that the ISO proposes to establish in the business process-oriented approach are:
1. Identification of organizational processes
* Define the purpose of the organization
* Define the policies and objectives of the organization
* Determine the processes in the organization
* Set the sequence of processes
* Define the process owners
* Define process documentation
2. Planning processes
* Define the activities within the process
* Define the monitoring and measurement requirements
* Define the resources needed for the operation of each process
* Check the process with respect to its planned objectives (consistent with the organization)
3. Implementation and measurement of processes
* Communication to staff
* Education & Training
* Change management
* Review and involvement of management
Motivate your Employees
To begin the process of motivating and retaining employees, you should find a hole in your schedule to meet with them daily and weekly.
He thinks that though it appears you do not have the time, is an investment. The meeting, organize your work and improve communication will save time and money later.
Business Tips – Investment
Investment value added means greater, providing better service and of course cost more, but a good strategy can make the difference you need to make your business more profitable in all senses of the commercial positions.
Here are some ideas which will be useful to offer to your customers and your business more profitable:
* Something Prize to people who visit your business: the fact that someone across the door of your local and visiting you have a chance. You can have a gift for the people who visit you. There must be something very expensive, can be candy, soda, or simply a memory that makes the visit more enjoyable.