Capital Investment – the crucial factor for a business

The most important criteria for a business can be the initial amount of investment. This is a broad area to be pondered about with respect to how to procure this amount, who will contribute it, what is the purpose of it etc.Therefore this topic takes a special place in the subject of finance and is termed as capital investment. This article will help us to get a basic understanding of this topic and a deep understanding need for further research in this field.

Definition

Capital investment refers to funds invested in a firm or enterprise for the purpose of furthering its business objectives. Capital investment may also refer to a firm’s acquisition of capital or fixed assets such as manufacturing plants and machinery that is expected to be productive over many years.”( Source- Investopedia)

Finance is the lifeblood of any business and so does capital investment also play a very crucial role in establishing and making the business work to its full capacity. Capital investment can be from many sources like equity investors, financial institutions, venture capital and angel brokers.

What are the uses of capital?

Capital can be put to various uses according to the business requirements.it has many long-term uses. Some of the most commons uses could be:

  • To acquire more fixed assets which have along term use for improving the future of business
  • Sustain the existing operations of the business to endure the long life of a business
  • Making better operational capacity by acquiring latest technology assets which can generate more revenue for the business
  • Capital investment can be in the form of equity which helps to get more relationship with investment companies and benefit the business in a better manner.

How to balance capital investment

Capital investment can be from many sources like banks, financial institutions and also from finance broking institutions. But the prior source can be the business’s operating cash flow which can be put to use for making more acquisitions needed for the business. But this needs to be kept in a balance as it necessary to note that more of investments continually is of no use. There should be a target revenue and then a business investment made from the profit which looks sensible to the business operations.

Thus the people who handle the capital investment decisions work in a very systematic manner to achieve the best options for the required capital investment for the business.