Steps involved in investment decision-making

Last updated: 16.03.2016

1. Analyse the resources that can be invested. They might include:

  • part of equity that can be paid out – e.g. retained earnings
  • other sources – e.g. loan, issue of bonds of shares

2. Find out investment needs, formulate possible investment project and assess them in terms of whether 

  • it enhances competitive advantage and is acceptable to shareholders
  • fits with the entity´s goals, objectives, strategy, investment policy and resources available
  • there are possible alternatives

3. Prepare Cost/benefit analysis (CBA) and assess the investment (NPV, IRR, payback period ...).

4. Prepare the total value of investments - e.g. the summary of all investments that have been evaluated as acceptable. If there are any similar/mutually exclusive projects , it must be decided which one will be carried out.

5. If budget is limited it must be decided which projects will be realised, which postponed and which refused.

6. Monitoring of the progress of the investment project mainly in terms of:

  • timing
  • spending not exceeding the budget
  • achieving the planned benefits and not exceeding the risks 


All investments must be in line with company goals, objectives, strategy and investment policy. They should follow the analyses of strengths, weaknesses, opportunities and threats.

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