Making the right investment decisions and implementing them successfully - Introduction

Investment decisions are undoubtedly among the most important and at the same time the most challenging corporate decisions. A wrong investment can have a negative impact on the company’s development in the long run, while a correct investment can make a significant contribution to growth and success. Therefore, it is all the more important to take all relevant aspects into account when making decisions. Numerous factors must be considered when making investment decisions, including tax aspects, investment incentives, capacity and utilization planning, logistics, and effects on personnel. The long-term profitability of the investments is a central criterion.

There are various types of investment decisions, each of which brings with it different questions and challenges. A choice decision deals with which investment among several alternatives should be implemented. In a replacement decision, the decision is made whether an existing investment asset should be replaced by a new one. The investment duration decision concerns the duration of use of an investment asset, while program decisions involve the selection and implementation of a combination of several investment projects.

The decision-making and implementation process of investment projects can typically be divided into several phases. In the planning phase, options for action are identified, information is collected, the feasibility is examined, and economic calculations are performed. In the implementation phase, the investment decision is made and implementation takes place. In the monitoring and control phase, investment control reports are prepared, target-actual comparisons are made, and an investment control system is established.

Investment accounting methods play an important role in all phases of the decision-making process to quantify the necessary decisions, support arguments, and compare different alternatives. Simply put, investment accounting methods are used to assess investment projects, whereby the absolute or relative profitability can be evaluated. Key prerequisites for assessing an investment are the revenues and expenses that can be attributed to the project. In theory and practice, the models of business investment accounting distinguish between static and dynamic investment accounting methods.

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