Exploring the Application of Capital Facility Investment Justification Model
For decades now, the models for identifying and quantifying the level of risk of investment projects and investment justification evaluation have been the subject of investigation by members of professional and research communities. It is important to quantify the level of risk because by evaluating...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Faculty of Economics and Business in Osijek
2013-07-01
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| Series: | Ekonomski Vjesnik |
| Subjects: | |
| Online Access: | http://hrcak.srce.hr/file/159401 |
| _version_ | 1797329685456093184 |
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| author | Marijan Karić Ivana Bestvina Bukvić Iva Buljubašić |
| author_facet | Marijan Karić Ivana Bestvina Bukvić Iva Buljubašić |
| author_sort | Marijan Karić |
| collection | DOAJ |
| description | For decades now, the models for identifying and quantifying the level of risk of investment projects and investment justification evaluation have been the subject of investigation by members of professional and research communities. It is important to quantify the level of risk because by evaluating investment justification in terms of the risks involved, the decision-maker (investor) is able to choose from available alternatives the one that will achieve the most favourable ratio of expected profit to the assumed risk. In this way, the economic entity can raise its productivity, profitability and the quality of business operation in general. The aim of this paper was to investigate the extent to which medium and large companies have been using modern methods of investment justification evaluation in their decision-making process and determine the level of quality of the application of the selected methods in practice. The study was conducted on a sample of medium and large enterprises in the eastern Croatia during 2011 and 2012, and it was established that
despite the fact that a large number of modern investment project profitability and risk assessment models have been developed, the level of their application in practice is not high enough. The analyzed investment proposals included only basic methods of capital budgeting without risk assessment. Hence, it was concluded that individual investors were presented with low-quality and incomplete investment justification evaluation results on the basis of which the decisions of key importance for the development of the economic entity as a whole were made. This paper aims to underline the need for financial managers to get informed and educate themselves about contemporary investment project profitability and risk assessment models as well as the need to create educational programmes and computer solutions that will encourage key people in companies to acquire new knowledge and apply modern financial methods. |
| first_indexed | 2024-03-08T07:09:02Z |
| format | Article |
| id | doaj.art-c99fc808ecc04e0985202adfd09c10e7 |
| institution | Directory Open Access Journal |
| issn | 0353-359X 1847-2206 |
| language | English |
| last_indexed | 2024-03-08T07:09:02Z |
| publishDate | 2013-07-01 |
| publisher | Faculty of Economics and Business in Osijek |
| record_format | Article |
| series | Ekonomski Vjesnik |
| spelling | doaj.art-c99fc808ecc04e0985202adfd09c10e72024-02-03T03:48:26ZengFaculty of Economics and Business in OsijekEkonomski Vjesnik0353-359X1847-22062013-07-01XXVI1188188Exploring the Application of Capital Facility Investment Justification ModelMarijan Karić0Ivana Bestvina Bukvić1Iva Buljubašić2Faculty of Economics of University of OsijekZagrebačka banka d.d. ZagrebFaculty of Economics of University of OsijekFor decades now, the models for identifying and quantifying the level of risk of investment projects and investment justification evaluation have been the subject of investigation by members of professional and research communities. It is important to quantify the level of risk because by evaluating investment justification in terms of the risks involved, the decision-maker (investor) is able to choose from available alternatives the one that will achieve the most favourable ratio of expected profit to the assumed risk. In this way, the economic entity can raise its productivity, profitability and the quality of business operation in general. The aim of this paper was to investigate the extent to which medium and large companies have been using modern methods of investment justification evaluation in their decision-making process and determine the level of quality of the application of the selected methods in practice. The study was conducted on a sample of medium and large enterprises in the eastern Croatia during 2011 and 2012, and it was established that despite the fact that a large number of modern investment project profitability and risk assessment models have been developed, the level of their application in practice is not high enough. The analyzed investment proposals included only basic methods of capital budgeting without risk assessment. Hence, it was concluded that individual investors were presented with low-quality and incomplete investment justification evaluation results on the basis of which the decisions of key importance for the development of the economic entity as a whole were made. This paper aims to underline the need for financial managers to get informed and educate themselves about contemporary investment project profitability and risk assessment models as well as the need to create educational programmes and computer solutions that will encourage key people in companies to acquire new knowledge and apply modern financial methods.http://hrcak.srce.hr/file/159401business decision-makingfinancial managementcontemporary methods of investment project risk evaluationcapital budgeting |
| spellingShingle | Marijan Karić Ivana Bestvina Bukvić Iva Buljubašić Exploring the Application of Capital Facility Investment Justification Model Ekonomski Vjesnik business decision-making financial management contemporary methods of investment project risk evaluation capital budgeting |
| title | Exploring the Application of Capital Facility Investment Justification Model |
| title_full | Exploring the Application of Capital Facility Investment Justification Model |
| title_fullStr | Exploring the Application of Capital Facility Investment Justification Model |
| title_full_unstemmed | Exploring the Application of Capital Facility Investment Justification Model |
| title_short | Exploring the Application of Capital Facility Investment Justification Model |
| title_sort | exploring the application of capital facility investment justification model |
| topic | business decision-making financial management contemporary methods of investment project risk evaluation capital budgeting |
| url | http://hrcak.srce.hr/file/159401 |
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