The Investment Decision-making Process

The making of investment decisions is critical for businesses, as they represent a way of achieving the organization’s goals and objectives. Potential investment opportunities to make sure that decisions reflect the requirements of the business and its financial management strategy include Mutual funds/exchange-traded funds, foreign currency exchange, Stocks and Shares, Bonds, land, Certificates of deposit.

In an open-end fund, monies are pooled from many investors to shop for securities. this is often a professionally managed investment fund. Capital investment usually includes significant cash flows for the organization; both in and outflows. this sort of investment is generally wont to finance the procurement of asset/s necessary to start out a venture.

Investment decision-making techniques are helpful in guiding financial managers in making appropriate business decisions. These techniques include payback which is the time taken for an initial investment to be recovered out of net cash flows. The accounting rate of return relies on identifying the profitability of the investment over its life. Net present value (NPV) – considers all costs and therefore the revenues of a project and it gives an easy decision rule which states that, if the NPV of a possible investment is positive then accept the project, if it’s negative then reject the project. a part of the role of the financial manager is to make sure that finance is used effectively and efficiently to form sure the organization’s objectives are attained. this is able to encompass investment appraisal, which considers the long-term plans of the organization and makes sure that the proper projects are adopted/invested in. Secondly, the matter of capital management. this is often concerned with the management of liquidity, confirm debts are collected which cash balances are appropriately invested among others.

The investment decision-making process involves key steps; determine the supply of finance, identify profitable opportunities, refine and classify proposed projects, evaluate the proposed projects, approve the projects, and therefore the monitoring and control of projects. Some investment appraisal techniques seek to mirror the value of cash. The (WACC) is often wont to decide the value of capital, it is often used because of the discount rate.

Investment evaluation methods include discounted income analysis, this makes it easy to match the returns you expect from an investment with its initial cost. an identical tool, the interior rate of return, allows you to match expected returns together with your costs of funding. The more straightforward measurement of the payback period tells you ways long it might fancy recovering your investment. The organization may evaluate the feasibility of investment proposals on the idea of capital budgeting techniques as per financial perspective. Major investments to drive improvements need careful evaluation to make sure that the potential financial and business impact is known. The strategic financial management process involves continuous monitoring, and planning and is typically focused on long-term profit. A competitive analysis should be done to make sure that the business needs are reflected alongside financial strategy while evaluating the investment opportunities. Investment opportunities should be evaluated to support the risk-return of investments and must match the organization’s risk appetite and anticipated return on the invested amount.

NCB Capital Markets provides clients with a good range of opportunities in investment. The team provides government agencies and medium to large corporate entities with tailored financial solutions to suit their varying principal needs. The bank provides advisory services and structures and executes an honest range of complex domestic and regional transactions including acquisitions, divestitures, mergers, and company restructurings. NCB recently invested heavily in the acquisition of the Guardian Insurance Group. The bank also invests in: Bonds – Global bonds, Government of Jamaica Securities, Structured notes. Also, market securities – Treasury bills, CDs, Repurchase Agreements, and Stock brokerage services. NCB launched an IPO within the land environment recently which facilitated the diaspora; they were ready to access this IPO through the GoIPO portal.

In the past year, NCB invested within the exchange needs for patrons and recorded a turnover of roughly US$5Billion. Partnership with Guardian group has strengthened NCB’s position within the insurance segment. The Bay west location was recently renovated to satisfy the requirements of consumers and staff more comfortably, a move to assist to understand operational efficiencies.

Non-financial factors and their importance within the making of investment decisions include employees; one among the first stakeholders, they’re the driver of the organization and it’s critical for them to be involved within the deciding process.