Investment (Capital Expenditure) Levels (AQA A-Level Business): Flashcards
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Practise the cards
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Define capital expenditure
Define capital expenditure
Spending on fixed assets for long-term use
Examples of fixed assets
Examples of fixed assets
Buildings, machinery, equipment, vehicles
3 stages when businesses invest in capital expenditure
3 stages when businesses invest in capital expenditure
Initial establishment, growth & development, replacement
Investment objectives link to corporate objectives
Investment objectives link to corporate objectives
They flow from and support broader corporate goals
Capital investment: manufacturing vs service businesses
Capital investment: manufacturing vs service businesses
Manufacturing needs more capital investment than service
Investment spending during economic downturns
Investment spending during economic downturns
Businesses reduce investment spending
ROI formula
ROI formula
(Return/Capital invested) × 100
What ROI measures
What ROI measures
Profit generated relative to investment cost
ROI limitation: forecast accuracy
ROI limitation: forecast accuracy
Based on predictions that may prove inaccurate
ROI limitation: timing
ROI limitation: timing
Doesn't account for when returns are received