Investment decision refers to selecting and acquiring the long-term and short-term assets in which funds will be invested by the business. Long –term investment decision is referred to as the capital budgeting decision. It relates to the investment in fixed assets e.g. buying a new machine. Before taking the final decision the finance manager makes a comparative study of various alternatives available in the market on the basis of their cost and profitability.
Short term investment decisions are also called working capital decisions. These are concerned with the decisions about the inventories, debtors, bills receivable and level of cash etc. It affects the day to day working of the business.
