Objectives of Investment Decision
Investment decision process of a listed company involves deciding what the company would invest and how much it would invest to generate the biggest benefits or expected returns for shareholders without cash shortfall. The objectives of making investments decisions within a listed company may vary (see Table 1 below) but it may directly affects the type of the investments being made. If a company is to acquire additional techniques and labor force, a decision to purchase another company would be made.
Table 1. Objectives of making investments decisions within a listed company
Profit Maximization of stakeholders
Achieve capital efficiency
Need of movements or adjustments of capital
Need of a specific purpose of the business
Need of business expansions
Need of organizational transition and reform
Types of Investment
The graph below demonstrates different types of investments available to listed companies.
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Internal Investments
Internal investments refer to the investments which the company allocates its capital or resources within the business to optimize its production and operation. It includes the investments on current assets and fixed assets (McLaney, 2003, pp. 24 – 28). For instance, a listed company may invest their money on machines that …show more content…
External investments could be in the forms of money injections and non-money injections (McLaney, 2003, pp. 24 – 28). A public company could invest outside by offering financial supports or it could provide the technical support or sell real assets to other companies. Merging and Buyout are the most common ways of external investments of a listed company. For example, Sony has announced that it has a deal with Toshiba of purchasing its imaging business (Triggs,