Q.2 (ii) Investment Decision
Best answer
Answer: Investment decision is the financial decision about where to invest the funds of the company.
It relates to the allocation of funds to different assets so as to earn the highest return at an acceptable risk. It covers (1) long-term investment decisions (capital budgeting), i.e. investment in fixed assets such as land, building, plant and new projects, which commit large funds for a long period and are usually irreversible; and (2) short-term investment decisions (working capital decisions), i.e. investment in current assets such as stock, debtors and cash, which affect liquidity and profitability. It is one of the three major finance decisions, along with financing and dividend decisions.
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