Investment decisions

The investment decisions of a firm is generally known as capital budgeting or capital expenditure decisions. A capital budgeting decision may be defined as the firm’s decision to invest its current funds most efficiently in the long term assets in anticipation of an expected flow of benefits over a series of year. The long term assets are those which affect the firm’s operations beyond the one year period. The firm’s investment decision would generally include expansion, acquisition, modernisation and replacement of long term assets. Sale of a division or business (Investment) is also analysed as an investment decision. Activities such as changes in the methods of sales distribution or undertaking an advertisement compaign or a research and development programme have long-term implications for the firm’s expenditure and benefits and therefore, they may also be evaluated as investment decisions.

Features:-

1) The exchange of current funds for future lengths.

2) The funds are invested in long term assets.

3) The future benefits will occur to the firm over a series of year.

Importance of Investment Decisions

Investment decision require special attention because of the following reasons:

1) They influence the firm’s growth in the long turn.

2) They affect the risk of the firm.

3) They involve commitment of large amount of funds.

4) They are irreversible or reversible at substantial loss.

5) They are among the most difficult decisions to make.

1) GROWTH:

A firm’s decision to invest in long term assets has a decisive influence on rate and direction of its growth. A wrong decision can prove disastrous for continued survival of firm, unwanted or unprofitable expansion of assets will result in heavy operating costs to the firm. On other hand, inadequate investment in assets would make it difficult for the firm to complete successfully and maintain its market share.

2) Risk:

A long-term commitment of funds may also change risk complexity of the firm. If the adoption of an investment increases overage gain but causes frequent fluctuations in its earnings the firm will become more risky.

3) Funding:

Investment decisions generally involve large amount of funds which make it imperative for firm to plan its investment programmes very carefully and make an advance arrangement for procuring finance internally or externally.

4) Irreversibility:

It is difficult to find a market for such capital items once they have been acquired. The firm will incur heavy losses if such assets are scrapped.

5) Complexity:

Investment decisions are an assessment of future events which are difficult to predict. It is really a complex problem to correctly estimate future cash flow of an investment. The uncertainty in cash flow is caused by economic, political, social and technological forces.

HR Manager has been playing a variety of roles at different stages in the past like that of police agency, a legal defender of rights and a negotiator, a catering man meeting the welfare needs of employees.

He performs many miscellaneous role in accordance with the needs of a situation such as.

(1) The conscience role is that of a humanitarian who reminds the management of its moral and ethical obligations to its employees.

(ii) The Personnel manager plays the role of a counselor to whom the employees frequently go for consultation and with whom they discuss their marital, health, mental, physical, and career problems.

(iii) As a mediator, he plays the role of a peace-maker, offering to settle the dispute that may arise among individuals or groups. He acts as a liaison and communicating link between an individual and a group and between labour and management.

(iv) The personnel Manager has always been a frequent spokesman for or representative of the company because he has a better overall picture of his company’s operations since he deals intimately with many key organisational activities and functions.

(v) The Personnel Manager also acts as a problem-solve with respect to the issues that involve human resources management and overall long range organisational planning.

(vi) He works as a change agent with in the organisation because he is best suited to introduce and implement major institutional changes. He take initiative for installing Organisational Development Programme and convincers the top management of their need. It is he who alerts top management regarding managerial obsolescence in his organisation.

(vii) He helps line managers learn to detect and solve it own problems.

(viii) Any matter which needs someone’s attention and which nobody wants to deal with is often handled by personnel department.

The basic role of Personnel Manager is “the management of manpower resources”. Such management is concerned with ‘leadership’ both in groups and individual relationship and labour management relations. It effectively describes the process of planning and directing application, development and utilisation of human resources in employment. Personnel management function is now considered as one of four main functions, viz finance, production, marketing and human relations.

The functions of Personnel Manager are very comprehensive and varied and are determined and influenced by such factors as the size, nature and location of organisation, its short-term objectives, economic, cultural and legal environment of business.

The role of Personnel Manager is ever expanding and is strengthened by greater interest shown in human relations. The ideal personnel manager is not a “decision maker” but a counsellor not “a collector of responsibilities but “an advisor” to help line management make more reliable personnel decisions.