As defined by Cistelecan, L. (2002) investment is an “expenditure made now in order to obtain a successful future, making gains in the future”. Investment is an essential vital issue for companies, because it can ensure the growth and the development of the companies, and without it companies can’t survive in the competitive markets. (Katalininc, B. 2009)
There are two types of investment as stated by Virlics, A. (2013). These types are fix investment and monetary investments. Fix investments are tangible assets, such as buildings, machinery or a plant. On the other hand, monetary investments are stocks and bonds.
On another point of view and as stated by Götze, U., Northcott, D. & Schuster, P. (2008), investment can be categorized by the cause of the investment as the following:
Maintenance or repairmen.
Change investment (e.g. rationalization, diversification).
Making the right decision to invest or not is not a simple process. Without a sound and clear image of the future of the opportunities, companies may go on bankruptcy. Another point, a lack of proper information about the investment may lead to wrong decisions, and therefore a well-defined method of investment appraisal is required.
The need for investment appraisal techniques in the process of decision making is justified by Katalinic, B. (2009) as the following:
New opportunities for the developing and the improvement of the company may be provided by a full analysis of the investment.
Investment is associated with the reallocation of resources and cash, which makes a carefu...
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...(1). Published by DAAAM international, Vienna, Austria.
Shively, G. & Galopin, M. (2000). An Overview of Benefit-Cost Analysis. Purdue University, Department of Agricultural Economics. [online]. [Accessed 2 April 2014]. Available at: http://www.agecon.purdue.edu/staff/shively/COURSES/AGEC406/reviews/bca.htm
The Manage Mentor Electronic Academy (TMM E Academy). (2003). Net Present Value. [online]. [Accessed 2 April 2014]. Available at: http://www.themanagementor.com/enlightenmentorareas/finance/mgr/NetPresentVal.htm
Virlics, A. (2009). Investment Decision Making and Risk. International Economic Conference of Sibiu 2013 Post Crisis Economy: Challenges and Opportunities. Published by Elsevier B.V, Faculty of Economic Science, Lucian Blaga University of Sibiu.
Watt, A. (2009). Understanding payback on investments. NZ business Magazine. Published by Adrenalin Publishing.
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