Investment Decisions, also known as Capital Investment Decisions are the most important financial decisions that an enterprise makes to utilize its funds to secure benefits over a period of time. It’s an integral component of the strategic decision-making of an enterprise or organization.
The term investment decision is interchangeably used with
Capital Budgeting or
Capital Expenditure
Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure ...
Decisions. The decision greatly impacts the future course of the enterprise making the investment decision. Therefore, a series of prerequisite processes and diligent procedures such as
Feasibility Study, Pre-FEED,
FEED, and
Cost Estimation A cost estimate is the approximation of the cost of a program, project, or operation. The cost estimate is the product of the cost estimating process. The cost estimate has a single total value and may have identifiable component values.
A problem ...
is followed to reach an investment decision.
Once the investors and project owners reach a consensus over proceeding with the investment, it is known as the Final Investment Decision (FID).
Hence, FID can be seen as the official start of a project when the real funds are utilized.
Investment decision biases
Bad decisions are often followed by a feeling of
investor's remorse.
See also
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Behavioral finance
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Cognitive bias
A cognitive bias is a systematic pattern of deviation from norm or rationality in judgment. Individuals create their own "subjective reality" from their perception of the input. An individual's construction of reality, not the objective input, m ...
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Relative strength Relative strength is a ratio of a stock price performance to a market average (index) performance. It is used in technical analysis.
It is not to be confused with relative strength index.
To calculate the relative strength of a particular stock, ...
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Ratio analysis
In mathematics, a ratio shows how many times one number contains another. For example, if there are eight oranges and six lemons in a bowl of fruit, then the ratio of oranges to lemons is eight to six (that is, 8:6, which is equivalent to the ...
References
Investment
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