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Investment Decisions in Organisations

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Questions and Answers

What is a critical factor in investment decisions due to the scale and long-term nature of the consequences?

Estimates of demand

Inflation

The investor's attitude to risk (correct)

Taxation

What is the primary goal of the accountant in investment and project appraisal?

To analyse the data using only one appraisal technique

To present the senior management team with the results

To make the investment decisions

To gather the essential data from various sources (correct)

What is the accounting rate of return method used for?

To calculate the payback period

To estimate the yearly cash flows

To determine the initial cash outflow

To compare investment and project appraisal (correct)

What is the usual decision rule when using the payback method?

To accept the project with the shortest payback period Signup and view all the answers

What is included in the initial cash outflow when using investment and project appraisal methods?

The purchase of physical assets or the build-up of stocks Signup and view all the answers

What is the profit referred to in investment and project appraisal?

The profit generated by the investment or project Signup and view all the answers

What is the primary difference between investment appraisal decisions and short-term decision making?

The time period involved Signup and view all the answers

What is a key concept in investment and project appraisal techniques that arises from the longer time period involved?

The time value of money Signup and view all the answers

What is one of the situations where investment and project appraisal may be used?

Cost saving through process improvement Signup and view all the answers

What is a factor that influences an organisation's decision to invest?

The investor's belief in the future Signup and view all the answers

What is an alternative financing option that an organisation may consider?

Leasing Signup and view all the answers

What is a key consideration in investment appraisal decisions?

The future costs and revenues Signup and view all the answers