Investment decision involves selections of assets in which funds are to be invested. Decisions relating to investment in fixed asests are knows as capital budgeting decision, whereas, those concerning investment in current assets are called working captial decisions.
A business needs to invest funds for setting up new business. for expansion and modernisation.
Investiment decison is taken after careful scrutiny of available altermatives in terms of costs involved and expected reture.
These decisions are very crucial for any business. Earning capacity of the fixed asserts of the fixed assests fo a firm, profitability and competitiveness. all are affected by the capital budgeting decisions. Moreover, these decisions normally involve huge amount of inverstment and are irreversible, expect at a huge cost.