The Theoretical Aspects Of Investments

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Introduction In our day to day interactions we end up making many investments anticipating future gains in terms of profits or dividends. In accounting, financial investments are extensively covered as they form the basis of many business interactions between people, companies and organizations. A financial investment can be described as the act of either creating or purchasing an asset for a fixed amount of money with the hopes and expectations of benefits in the future. A perfect example is when a company provides services or particular assets, e.g. land to another company or group of people for a pre-determined value. The primary focus of this paper will be to highlight and critically analyze the theoretical aspects of …show more content…

Therefore, it is of great importance for adequate prior research to have been conducted on the asset before the investment is made. In addition to this, the market must be carefully studied to provide concrete and reliable predictions of future trends in relation to the particular asset (Elton, 2009). Income Emanating from Dividends and Interest Accrued The second main reason why investors spend both money and their time on investments is to realize the income that comes in the form of dividends and interest from assets. Over time, an asset generates either interest or dividends depending on its use. Assets owned by a company or an individual investor and are loaned to other individuals or businesses generate interest. This interest is a compensation to the owner of the asset. To the investor, the interest is the value he, she or it derives from the investment made on the asset. If the investor invested in a company, then his, her or its reward will come in the form of dividends. Dividends are mainly the periodic payments made to shareholders of a company depending on their level of investment, the more money invested in a company, the more the dividend returns will be. Control and Influence The third and final reason why investments are made is to establish and maintain significant control and influence over a company, sector, region and many more. By investing in companies and assets, investors are

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