Investment Management

Financial Instruments A financial asset is something which is defined as an entitlement of future cash flows. However, a financial instrument is a broader term used to describe financial assets and other assets in which there are no organised secondary markets to trade them. However, a financial security is something that can be traded in a secondary market. Attributes of Financial Assets Financial assets are those that: • • • • Have a return of yield expressed in terms of percentage. Have risk in which there is probability the actual return will differ from the expected return. Are liquid in that they can be sold at current market prices with reasonable transaction costs. Are expected to have a set time-pattern of cash flows in or out.

Investments. “The analysis and process of choosing securities and other assets to purchase.” (Cornett, Adair, & Nofsinger, 2016, p. 7).

Assets are to be recorded and valued based of the type of asset there are.

The IS function is the investment-saving function. A shift to the right implies that for any given level of

However, assets can be categorized into fixed assets and intangible assets. Fixed assets are tangible assets acquired by the business used in operations like property, plant and equipment. Intangible assets are assets of value without physical substance that are used in business such as licenses, patents, trademarks, copyrights and ect. The intangible asset is defined as ‘an identifiable non-monetary asset without physical substance’. (Deegan 2010) An asset meets the identifiability criterion when it is separable i.e. is capable of being divided from the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract,

An investment can be defined in several ways. First, we’ll have a look at the financial implications of the

If one owns a large business, it is probably common to place one’s money into investments in order to ensure a higher interest rate than simply placing funds into a bank account.

The individual in an economy has two basic option of utilizing his cash: save or consume/invest. If the interest rates are higher, then the individual is more like to save than invest, because his return on investment (namely, on his savings) is bigger than if the interest rates are lower. With this in mind, the individual will spend more, purchase more products and services, invest perhaps in businesses etc.

Capital expenditure is incurred to acquire fixed assets for the operation of the business. Example, acquiring land, plant and machinery to commence a new business or expand the current business.

2. Financial Capital is composed of long-term plant and equipment, as well as other tangible investments.

An investment is when an asset or any other item is being purchased with the confidence that it will generate income or escalate in the future. However, in an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset acquired with the impression that the asset will provide revenue in the future or rise and be sold at a greater price. Moving further, foreign investment is when capital flows from one nation to another in exchange for an agreed amount of ownership in the local company and its assets. Therefore in foreign investments the investors take an active role in managing the organisation in which they have invested. With the

Capital investment decisions that involve the purchase of items such as land, machinery, buildings, or equipment are among the most important decisions undertaken by the business manager. These decisions typically involve the commitment of large sums of money, and they will affect the business over a number of years. Furthermore, the funds to purchase a capital item must be paid out immediately, whereas the income or benefits accrue over time. Because the benefits are based on future events and the ability to foresee the future is imperfect, you should make a considerable effort to evaluate

One of these is with regards to goodwill and intangible assets with identifiable useful lives.

Second part is the individual investors have to set the investment guidelines and constraints while doing the investment. Investment guidelines are referred as the road map for investment over different stages of the financial life cycle, and also consist of the financial goals and the financial perspectives. After that, the individual investors have to address the investment constraints and take into consideration when managing the investment. Some constraint factors embraced tax consideration, investment duration and liquidity.

An investment also known as a security is a pledge of money from an individual, government, or cooperation that is expected to accrue additional wealth on top of its original dollar amount. An investment can be a long-term or short-term obligation depending on the investor’s goals and/or assets they choose to invest in. The investment decision process is a two-step process which is necessary to make a sound trustable and efficient investment. The first step involves an evaluation of the investment you as the investor are interested in committing money towards, including characteristics of the security (i.e. how it acts in the current market, how the current/future market may react to this investment and possible returns on your investment). Finally, the management of your investment portfolio, including how often it should be revised, how the performance of your securities should be measured (how often they should be measured), and other important aspects of your current investments. Investing revolves around one basic concept, improving our future, investors invest money today to improve their welfare in the future which is why understanding what an investment is and the process of decision making before investing is extremely important.