Answer to Question #180460 in Economics for ackelia mclaren

Question

Identify the information that is necessary before a financial planner can assist a person in constructing an investment policy statement and outline why this information is important.

Answer 1

Investment decisions is a procedure for approving an idea based on the assessment and analysis of information available about an investment asset. The main criteria for making a decision are historical experience, potential profitability and risk.

In a simpler form, an investment decision is usually called a balanced and reasoned analysis of all the positive and negative aspects of investment. The decision is made (depending on the size of the investment project) the entire investment group or one person.

It is necessary that the decisions made are consistent with the strategic goals and objective capabilities of the investor.

The assessment allows you to secure your investment from the risk of loss and helps to predict the amount of compensation and / or profit for all participants in the process.

The object of analysis is not the project itself, but the associated cash flows. The implementation of a project is a complex and multifaceted process, and it is very difficult to calculate, predict the options for the development of events in detail. For the analysis, economic and mathematical models, expert methods of collecting information are used.

First of all, the following factors are evaluated and subjected to:

Risk and return indicators affecting the results of the investment project

Payback periods.

Types of investment decisions depending on the direction of investment:

solutions, the direction to reduce the costs of conducting core activities (costs for the release of main products, quality improvement, improvement of production technology and organization of work processes)

solutions related to the development and modernization of production (reconstruction, expansion and construction of new facilities)

solutions related to the development of new sales markets

decisions aimed at the acquisition of various financial and intangible assets in order to generate income in the future

obligatory investments (improvement of working conditions, reduction of economic damage).