Investment Analysis: Ratio Analysis And Capital Budgeting

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Question :

Present a discussion on various tools of ratio analysis and capital budgeting.

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Answer :

Investment analysis


There are several investment tools which could be used by the investors to assess the particular investment option. However, ratio analysis, capital budgeting and trend analysis are the mostly used financial tools which could be used by investors to identify the possible investment option which would help them to increase their overall return on capital employed. The investment analysis is required to identify the time value of money and whether the return on capital employed earned by the investors is more than the cost of capital of the invested capital or not. Now in the end, after assessing the veracious investment options by using the investment analysis tool, it could be inferred that investor’s first focus on assessing the investment option on the basis of the return on capital employed, time value of the money and present value factors which might impact the changes in the capital value throughout the time (Robinson, and Burnett,, 2016). The crux of this report is that investment analysis is the key foundation for the investors to keep their invested capital value high in market (Brigham, and Ehrhardt, 2013). However, in order to assess the true return on capital employed in the particular investment option, investors should not rely on the particular results drawn by using one investment analysis. They should focus on multiple investment tools which could help them to strengthen their investment value and assessing the true future value of the invested capital.