Question

How would you describe capital investment decision making and its relationship with long-range planning decision making?​

Answer 1

Capital Investment Decision making

Having the ability to make good choices when it comes to capital investment decisions is one of the factor that is crucial to the success of a business . First step is to understand what capital investments are and their objectives . Also, to know how the amount of funds are available that affect choices, and the role that the cost of capital plays in the capital investment decision-making process which are all factors that help a business achieve success. What are Capital Investments? Capital investment decisions are being among the most prime decisions made by an organisation. Capital investments refer to furthering an organisation’s objectives with the process of investing funds in the right manner. For any organisation this entails multiple funding options with a variety of differing rates. A capital investment decision is one that involves a high value investment that can assist in achieving benefits for an organisation for long term. The various sources of capital investments consists of financial institutions, banks, venture capital along with angel and/or equity investors. Capital investments are generally long-term assets, however a portion of it may be applied for purposes of working capital. There are a few distinct types of capital decisions that are made in accordance with the specific situation. They are expansion decisions, strategic decisions, and replacements decisions. An expansion decision is one that is designed to increase the capabilities of an organisation through their operations and functions. Strategic decisions are those designed to increase an organisation’s strategic position. A replacement decision is one that is intended to use new assets that cut costs to replace the older assets. The Objectives of Capital Investments is how capital investments are funds invested in to an organisation to further its business aspirations, the major objective is that these funds can increase assets and increase the organisation’s overall position. The main purpose of investing is to obtain a positive net present value (NPV).

Long -Range Planning Decision Making is referred as all organisational processes that

• identify long-term goals, based on context and needs assessments
• make written principles, rules, and guidelines in order to reach its long-term goals
• make strategies and create the steps to achieve them
• make collective strategic decisions

Following this definition three main criteria were identified as essential for good practices of youth peace-building organisations. Those are:

1. Strategic planning
2. Decision making
3. Support measures (for planning and decision making)

Both Capital Investment Decision making & Long -Range Planning Decision Making are interrelated. In Long Range Planning Decision, one is required to take Capital Investment Decision. In long- run, where the organisation will require funds or will face crisis of the funds , Capital investment decision comes to the rescue. Capital will be required by the organisation at frequent times for purchasing assets for fulfilling big orders. Whether extra capital is to be invested or not during the long term of the project, capital investment decisions comes to the picture. Without adequate Capital investment planning , long range planning cannot be done.