INVESTMENT DECISION AND COST OF CAPITAL

In Finance, investment decision is disclose the allocation of funds in fixed assets or long term. This decision is also known as capital expenditure decision / capital budgeting decision.  These decisions associated to the profitability of the business. Financial management is associated to procurement of funds at cheaper cost and allocating them to projects at higher rate of return. The borrowing or procuring function is associated to the calculation of the cost of every kind of source of funds in addition to the overall cost of all sorts of funds borrowed or to be borrowed by a business.  The guiding standard in both these decisions is that - the overall cost of capital must be the lowest and the return on the various investments must be the highest at any specified period.  These two decisions will decide the financial health of an organization.