The investment decision is one of the two principal decisions a corporation has to take. The investment decisions of a corporation are of two types:
1. Smaller Investment Decisions
Corporations make thousands of smaller and simpler investment decisions every year. These investments decisions are for example purchase of a vehicle, machine tools or any other regular running equipment. Usually managers themselves take these decisions.
2. Larger Investment Decisions
Larger investment decisions are also called capital budgeting or capital expenditure (CAPEX) because usually these investments list in a company’s annual budget. Managers do not take these decisions by themselves only. These decisions are taken after intensive research, in consultation with engineering, manufacturing and marketing department, and with the approval of board of governance.