Write an Investment Decision on Budgeting & Forecasting

Introduction

Purpose 

The main purpose is to choose a profitable venture from two options available and make an investment in the same (RR Fullerton 2014). The main purpose of the investment is to make the profit out of the chosen venture. Various managerial tools are used for making an investment decision and the result which shows a venture more profitable than other is adopted.

Scope

It has analyzed both the options and decision is based on the managerial tools adopted for decision making such as capital budgeting, forecasting, and budgeting. The investment decision can be made only after analyzing the options which start with fund contribution and ended with desirable return (Otley 2016). The investment decision help to formalize the process and specify the conditions needed to accept the certain project. Any decision will only be made when the investor will be ensured that it will get the favourable return from the venture.

Limitations

The investment analysis provides an objective outlook on the project to be chosen. It does not take into account the subjective aspect of investment in the account. As it cannot measure the economic benefit lost or gained from the project.

Nature and Scope of Investments

The investment decision is based on the budget forecast made. For management decision making budgeting is one of the important tools. It has following features as a management tool for managers (DJ Cooper 2013) –

• It provides direction to the managers on whether they are working in the right direction or not.
• Helps in measuring the performance of the company.
• Helps in overspending control for the less productive area.
• Helps in better organization and control.

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