Capital Investment Management: How Are Key Decisions Made?

Capital investment management is the plan a business has to grow its capital and in turn increase its profit. Strategies for a business’ capital investments should always center on the most efficient and risk-free way to increase a business’ capital.

Types of Capital Investment Management

The management of capital for businesses both large and small can be categorized into two groups, both of which are typically employed for a single business

  1. Short-term (Working) – Working capital investment management strategies are centered on making a business profit but also assuring some short-term cash flow for business debt, purchases, and payroll.
  2. Long-term – Long-term capital investment strategies revolve around keeping capital in the investment market, even in down periods, to assure maximum long-term profit. Losses are offset by reallocation and further investment diversification.
What Qualifies as Capital Investment

Capital investment is any financial investment that stands to benefit a business, including:
  • property – Whether to expand your own business or to fix up to later sell at a profit, property, including land and buildings, can expand your company’s worth.
  • equipment – Manufacturing and office equipment isn’t cheap, but it’s a necessary investment that can increase the efficiency of your manufacturing processes and/or of your workforce and in turn increase profit.
  • stocks and bonds – A business can actually be earning profit through a “second” business on the side: the investment market. Channeling excess profit into stocks and bonds is a crucial long-term investment strategy.
Key Capital Investment Management Decisions

Drafting an investment plan is paramount to a successful business. Key capital investment management decisions include: 
  • what to invest in – Not every business will profit from purchasing more property or equipment, but some will. Each business should draft an individual capital investment plan with the aid of an investment management firm.
  • how much to invest in each category – Each business must determine how much capital to invest in short-term and how much to invest in long-term categories, but should have investments in both. Start-up companies tend to need more working capital, so the majority of their capital is invested in short-term avenues. Established companies can afford to put more capital in long-term investments.
Venture Capital Investment

Companies that open themselves to venture capital investment—private or public investors who purchase stock in the company—earn more cash to invest in company purchases or in the market. A capital investment management firm is able to evaluate whether or not your business qualifies as a high-potential growth company that can benefit from venture capital investment.

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