Essay On Corporate Investment Analysis

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Corporate investment analysis Investment analysis takes different forms and is applied to support a number of key decisions throughout the investment, acquisition and program cycles. Several approaches are used in this analysis. This includes; cost benefit analysis, alternatives analysis, business card analysis and economic analysis. This paper explains different aspects in the corporate investment analysis. It also highlights the use of derivatives to efficiently manage investment risks in an investment portfolio. Why investors may be attracted to high-risk investments Does the higher return from investment come with increased risk? This is a question usually asked by many before investing in a complex investment vehicle. The most definite answer is yes. There is a direct correlation between higher risk investment and returns (Denis Babusiaux 2005). The quest for higher returns leads to venturing in complex investments with greater risks and increased possibility of investment losses. The riskier and more esorotic products promise more yields and higher returns. Although there are gains, direct chasing of returns in a difficult environment, like volatility in the stock at market, low yields are usually associated with higher risks (Gaylon 2003). Risks associated with exchange-traded derivatives The use of exchange traded derivatives can inflict substantial losses to investors. Trading of derivatives on exchanges can be faced with a number of risks. Borrowing and leverage are some of the major causes of the losses. The presence of relatively low cost alternatives to buying of stocks has eased the number of risks, although the major ones still ... ... middle of paper ... ...tructures and investment portfolio.Before venturing in any investment a thorough analysis is required. Setting criteria on what to invest on depends on the understanding of corporate finance and market principals. Derivative markets have in the recent past been accused of fueling the current financial crisis in the world. As stated by the G-20s, financial reforms need to be undertaken in order to save the world’s economy from crumbling. REFERENCES Denis Babusiaux (2005) Corporate Investment Decisions and Economic Analysis. Chicago. Roses & Sons (Oct 15, 2009) Financial Derivatives: Pricing and Risk Management. New York: Random House Maurice &Edward (2011) Single Stock Futures: An Investor's Guide. Oxford University Eddy Wymeersch, Klaus J (2012). Financial Regulation and Supervision: A post-crisis analysis. Missisipi.

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