Factors which will affect business investment and Cameron Balloons Investment decisions

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Other factors which will affect business investment and Cameron Balloons Investment decisions

There are different factors which will affect the decision that a business will make about their investments.

The factors which will affect the business investment are:

Capital rationing – this is when a firm has few profitable investment opportunities but do not have enough capital to fund them.  There are two different types of capital rationing.  One is Hard Capital Rationing and the other one is Soft capital Rationing.

  • Hard Capital Rationing - this will take place if the capital shortages are result of external influences.
  • Soft Capital Rationing – this type of capital rationing will happen because of internal constraints.

Inflation – this is when prices rise, and if prices are raising speedily investment decisions become trickier.  Fast inflation will decrease the value of the money and as the prices rise the value of the money in future will become valueless.  This will also have an effect on the investment if the interest rates start to rise.


Taxation  it is legal for a business to pay tax.  There has been a reduction recently in taxes on profit which will mean that the business can keep more of its profits.  By this way business has more capital for investment projects and if businesses invest they can use this to offset the cost of investment against tax which reduces the businesses tax liability.

Human relations – it is not unusual for investment projects to have an important impact on staff in an organisation.  Investments aid business to grow which will mean that there will be new jobs created and future jobs can be secured.

Corporate strategy – this is when the businesses views the decision that they take when making an investment and the decisions which will affect the businesses overall objectives.

Business confidence – this is one of the most vital influences on investment decisions.  Business owners and managers should take some time to view their decisions when making an investment.  Business confidence is affected by some factors such as:

  • Rivals investment activities
  • Interest rates
  • Unemployment levels
  • Success of previous investments
  • Inflation rates
  • Future order levels


Ethical considerations – the number of businesses are increasing who want to be good corporate citizens.  For this businesses will be responsible socially and they will need to consider the views of all stakeholders.

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The capital rationing will not affect Cameron Balloons much because the capital they are planning to use for investment is £200 to £125,000.  Cameron Balloons need to consider inflation during making decisions for their investments because they will need to look at time value of the money.  Cameron Balloons does pay tax and by making investments their tax rates will change, which is another factor which they will need to consider.  Cameron Balloons will also need to take in account human relations and how it will the investment affect them.  Overall objectives of business is very important and for ...

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