• One of the key areas of financial management is the management of the resources
  • An important resource being the assets that are employed by the business
  • They are a potential driver of shareholder wealth and value

Capital investment

  • This is the name given to describe the purchase or creation of assets
  • The objective being to yield future gains (over a period of time)
  • These gains must represent the present day values of future cash flows
  • The investment should provide market and economic added value to the owners
  • Capital investment represents one of the most important long-term strategic decisions for any form of business


  • The scale of the proposed project
  • Can the business afford the cost? (known and forecast)
  • When will the capital project start to generate a return on the investment?
  • What is the opportunity cost?


  • The proposed project represents a risk to the:
  • Wealth of the business
  • The shareholder value
  • The continuation of the business as a ‘going concern’

Let us stop and consider the wider picture

  • The development of the Corporate strategy –
  • The formulation: Analysis of the external environment (E.G PEST and SWOT analysis)
  • Identification of possible strategies to adopt
  • Testing against 3 key standards

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