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Investment: Importance and Types Macro Economics

ADVERTISEMENTS: Let us make an in-depth study of Investment:- 1. Importance of Investment 2. Types of Investment. Meaning and Importance of Investment: The level of income, output and employment in an economy depends upon effective demand, which, in turn, depends upon expenditures on consumption goods and investment goods (Y= C + I). Consumption depends upon […]

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Investment and Business (Study Notes)

(8 days ago) It is measured by the revenue the firm has to forego by investing the money in a project. If the firm had lent out those funds to others it could earn the rate of interest (if not more) in return. The lower the rate of interest, the lower the cost of borrowing money to acquire an income-earning asset like a machine.

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Theories of Investment Analysis Company Financial

(2 days ago) ADVERTISEMENTS: Read this article to learn about the top seven theories of investment analysis. The theories are: 1. Flow of Funds Theory 2. Market Efficiency and Random Walk Theory 3. Efficient Market Theory 4. Random Walk Theory 5. Trend Walk Theory 6. Capital Asset Pricing (CAP) Theory 7. Modern Portfolio Theory. Theory # 1. Flow […]

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Investment Function in an Economy: Importance, Types and

(9 days ago) According to Hicks, investment is of two types, induced as described above and autonomous— it is independent of variations in output. Explaining autonomous investment, Hicks remarks: “Public investment, investment which occurs in direct response to inventions and much of the long range investment (as Mr. Harrod calls it) which is only expected to pay for itself over a long period, all of

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Investment Information: Types and Need Financial Economics

(Just Now) Investment Information: Types and Need | Financial Economics. Security Analysis requires as a first step the sources of information, on the basis of which analysis is made. The Securities market is a perfect auction market where demand/supply pressures determine the price. These demand/supply pres­sures depend upon the available money and the

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Incentives for Saving and Incentives for Investment

(4 days ago) ADVERTISEMENTS: Incentives for Saving and Incentives for Investment! Type # 1 Incentive for Saving: The importance of capital formation, hence, of the saving/Investment rate for economic deve­lopment, has been pointed out. But many deve­loping countries score rather little in raising the rate of capital formation—thereby vindicating Nurkse’s statement: “A country is poor because it is

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Cost-Benefit Analysis: Meaning and Uses Investment

(4 days ago) An analytical model called cost-benefit analysis is used to analyse the wider impact of resource allocation and investment decisions. Properly understood, it is Social Cost-Benefit Analysis of investment projects though the word’ social’ is often omitted. Thus in social cost-benefit analysis, we estimate both the direct and indirect costs

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Types of Financial Decisions in Financial Management

(5 days ago) The functions of raising funds, investing in assets and distributing returns to shareholders are main financial functions or financial decisions in a firm. The finance functions are divided into long-term and short-term decisions as mentioned below: (a) Long-Term Finance Decisions: (i) Investment decision (ii) Financing decision

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Relationship: Investment and Stock Market Economics

(5 days ago) There is a close relation between the stock market and investment. Fluctuations in the stock market can affect investment of firms. The relationship between stock prices and firms’ investment in physical capital is captured by the “q theory of investment”, developed by James Tobin. Suppose a firm has 10 machines and 10 shares outstanding—one share per machine.

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Investment Decisions: Meaning, Need and Factors Affecting It

(1 days ago) ADVERTISEMENTS: In this article we will discuss about:- 1. Meaning of Investment Decisions 2. Categories of Investment Decisions 3. Need 4. Factors. Meaning of Investment Decisions: In the terminology of financial management, the investment decision means capital budgeting. Investment decision and capital budgeting are not considered different acts in business world. In investment …

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The Neoclassical Theory of Investment (With Diagram)

(3 days ago) Thus, investing (I t) in a period can be written as: I t = K t – K t-1. ADVERTISEMENTS: Flexible Accelerator Model: There are a number of hypotheses about the speed at which firms attempt to make adjustment in capital stock over time. An important such hypothesis is called flexible accelerator model. According to this model, firms plan to

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Objectives of Financial Management

(7 days ago) If the investing community is impressed with the track record of a company it will get a good rating and its share price would improve over time consistently. As rightly pointed by Solomon, value maximization is simply an extension of profit maximization to a world that is uncertain and multi-period in nature.

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Investment: Components, Analysis and Effects Investment

(5 days ago) Investment spending is of three types: 1. Fixed investment — business purchases of new plant, machinery, factory buildings and equipment. 2. Residential investment — construction of new houses and flats. 3. Inventory investment — increases in stocks of goods produced but not sold. This is known as working capital and consists of stocks of

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Transfer Problem and Terms of Trade International Economics

(6 days ago) The long term capital movement, to be successful, must involve a transfer of real resources (goods etc.) from the investing or lending country to the host or borrowing country. If country A is to invest $ 100 million in country B, it must release domestic real resources or goods worth $ 100 million and export them to the host country B.

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Advantages and Disadvantages of Joint Stock Company

(3 days ago) The company form of organization is an effective medium of mobilizing the scatter savings of the community and investing them for different commercial pursuits. It pro­vides employment to many people, supplies goods and service to consumer, support several social projects and contributed a large amount of revenue to the Government.

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Economic Growth of a Country: Meaning and Views

(4 days ago) The World Bank, however; feels that the continued progress in implementing reforms that relieve supply- side constraints, such as reducing energy supply bottlenecks, labour market reforms, improving the business climate, and investing in education, health and infrastructure would be the key to growth.

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Adam Smith’s Theory of Economic Development Economics

(5 days ago) Adam Smith is known as father of economics. We get his ideas about economic development from his well-known book, “An Enquiry into the Nature and Causes of Wealth of Nations” (1976) which has tremendously influenced the thinking about economic growth and development.

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Capital Budgeting: Meaning, Steps and Methods (With Diagram)

(6 days ago) In Fig. 22.4 we show that by investing the required sum in project A it is possible to derive a steady cash flow of Rs. 10,000 per annum for ten years. Alternative­ly, if the sum is invested in project B, the return may initially rise from Rs. 5,500 in the first year to Rs. 14,500 in the tenth, or, if the sum is invested in project C, cash

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Relationship between Saving and Investment Economics

(7 days ago) ADVERTISEMENTS: The upcoming discussion will update you about the relationship between saving and investment. Incomes are generated by production and the economic system is said to be in equilibrium when all the incomes earned are returned to the income flow through spending. Keynes’ income-expenditure analysis fo­cuses on the relationship between aggregate expenditures and …

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Trade-Off between Risk and Return Investment

(7 days ago) In addition, let the expected return from investing in the stock market be R m and the actual return be r m. The actual return is risky. ADVERTISEMENTS: At the time of the investment decision, we know the set of possible outcomes and the probability of each, but …

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International Capital Movements: Meaning and Effects

(5 days ago) The investing country though, on the whole, gains from foreign investments; there is a redistribution of domestic income from labour to capital. In the host country, there is a gain from capital flows in the form of redistribution of income from capital to-labour. If there is a less than full employment situation in the investing country, the

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2 Major Elements Affecting Inducement to Invest

(Just Now) ADVERTISEMENTS: The following points highlight the two major elements affecting inducement to invest. The elements are: 1. Rate of Interest 2. Marginal Efficiency of Capital of a Capital Asset. Inducement to Invest Element # 1. The Rate of Interest: The first element affecting inducement to invest is the rate of interest. Keynes gave an entirely […]

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Time Preference of Money for Investment Techniques

(4 days ago) In three years it becomes 100 (1 + 0.5) 3 = 115.76 and so on. In the case of discounting, it is the reverse of the above formula, namely, For the same three year period, at the end of 3 years, the future value should be Rs. 100 for investing Rs. 86.4 at present.

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Acceleration Theory of Investment Economics

(6 days ago) ADVERTISEMENTS: There are two fundamental macro-economic principles viz., the multiplier and the acceleration. J.M. Keynes who developed the multiplier, ignored the effects of induced investment. According to Paul Samuelson, in the long run, the effect of an increase in spending world not stop with the effect of an increase in spending world not stop with […]

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2 Types of Capital Flows on Private Account

(1 days ago) The head office is in the investing country and the operations are in the developing country. Another method is that an already existing corporation spreads out its business in another country by establishing branches. Thus, many foreign companies producing cars, colour TVs have set up branches in India and are producing these items in India.

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Changes in Rates of Interest and Investment Decisions

(6 days ago) The rate of interest is an important variable affecting the level of (planned) investment expenditure. The fundamental point here is that investments are undertaken up to the point at which the marginal invest­ment is expected, over the lifetime of an asset, to yield returns which just …

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Top 3 Theories of Investment – Discussed!

(1 days ago) Top 3 Theories of Investment Discussed! Article Shared by Diptimai Karmakar. ADVERTISEMENTS: The following points highlight the top three theories of investment in Macro Economics. The theories are: 1. The Accelerator Theory of Investment 2. The Internal Funds Theory of Investment 3. The Neoclassical Theory of Investment.

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Define Investment in Economics

(3 days ago) (iii) Residential investment, which includes new houses for purchase or rent. In private enterprise economies, investment is characterised as gross private domestic investment, that is, residential housing construction and business acquisition of new industrial plants, of machinery and equipment, and of additional inventory.

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International Capital Flows: Benefits and Damages Economics

(2 days ago) ADVERTISEMENTS: In this article we will discuss about:- 1. Role of International Capital Movements 2. Benefits of International Capital Flows or Foreign Aid 3. Dangers. Role of International Capital Movements: Traditionally the capital movements were considered important as they assisted in the maintenance of BOP equilibrium. A country, having a BOP surplus, will invest or […]

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Term Paper on Diversification Investment Financial

(9 days ago) Term Paper on Diversification. Term Paper # 1. Meaning of Diversification: Diversification is a technique of reducing the risk- involved in investment and in portfolio management. This is a process of conscious selection of assets, instru­ments and scrips of companies/Government securities, in a manner that the total risks are brought down.

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Cash Flow Statement: Meaning, Preparation, Limitations of

(2 days ago) However, investing and financing activities, such as issue of share capital and long-term borrowing, do not take place on a day-to-day basis. The organization carries out these activities occasionally. Therefore, there is no separate proforma to calculate cash flow from investing and financing activities.

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The Keynesian Theory of Investment (With Diagram and Example)

(5 days ago) The MEC is calculated by using the following formula: where C 0 is the purchase price of the machine in the base year, R 1, R 2, etc. are the expected cash flows from the machine in the first, second and subsequent years and e is the MEC which acts as the balancing factor.It makes the two sides of the above equation equal. Here R n is the expected cash flow from the machine in the last year

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Economic Effects of Taxation: Top 6 Effects

(4 days ago) ADVERTISEMENTS: Effects of Taxes: The most important objective of taxation is to raise required revenues to meet expendi­tures. Apart from raising revenue, taxes are considered as instruments of control and regulation with the aim of influencing the pattern of consumption, production and distribution. Taxes thus affect an economy in various ways, although the effects of […]

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Introduction to Financial Management: Meaning, Definition

(9 days ago) The finance manager is also expected to study various opportunities available for investing in order to have further growth and expansion while deciding upon the dividend payout ratio. The dividend payout ratio is the proportion of net profits to be paid out to shareholders as profits.

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CAPM: Assumptions and Limitations Securities Financial

(1 days ago) At O* this portfolio involves investing 50% of the investor’s funds in risk free asset and 50% in portfolio T. Next at point O**, this portfolio involves borrowing an amount equal to 50% of investor’s own funds and investing the borrowed funds and investor’s own funds at point T.

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Solow Model of Economic Growth Economics

(8 days ago) Saving and Balanced Growth: In the simplest version of Solow’s neo-classical growth model, the economy is closed (so domestic saving equals investment) and there is no technologi­cal change. These two assumptions make it easier to see what is going in a modern capitalist economy. Labour-force growth is assumed to be at a constant rate, n.

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Difference between Economies and Diseconomies of Scale

(5 days ago) Difference # Diseconomies of Scale: Because of increasing size, a firm enjoys certain advantages. But, growing size can also bring certain disadvantages. This means that as the volume of production increases with an increase in firm size, economies of scale yield place to diseconomies of size.

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Trade and Financial Relations between Different Countries

(8 days ago) This case implies that the residents of the country would be lending or investing abroad. (2) If saving is less than domestic investment (S < I or S -I < 0) of a country, its net exports will be negative, that is, the country will be running a trade deficit. In this case there will be capital inflows to finance the extra imports.

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Foreign Investment by Multinational Companies (Alternative

(4 days ago) ADVERTISEMENTS: Foreign Investment by Multinational Companies (Alternative Methods)! In order to increase their profitability many giant firms find it necessary to go in for horizontal and vertical integration. For this purpose they find it profitable to set up their production or distribution units outside their home country. The firms that sell abroad the products produced […]

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Deficit Financing: Meaning, Effects and Advantages

(3 days ago) Finally, during inflation, private investors go on investing more and more with the hope of earning additional profits. Seeing more profits, producers would be encouraged to reinvest their savings and accumulated profits. Such investment leads to an increase in income—thereby setting the process of economic development rolling. (b) Disadvantages:

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