THE ROLES OF MANAGEMENT ACCOUNTING FOR INVESTMENT DECISION IN AN ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1BACKGROUND OF THE STUDY

Investment decision making, especially capital investment decisions are those that involve current out lay for a stream of benefit in future years. This is because all the firms expenditure are made in expectation of realizing future benefit.

Capital investment decision differs from shortterm decision because of it duration and substantial proportion of firm resources committed in to investment that are likely to be irreversible.

The investment decision is the most important decision when it comes to the creation of value capital investment is the allocation of capital to investment proposals whose benefits are to be realized in the future. Because the future benefit are not known with certainly, investment proposal necessarily involve risk. Consequently, they should be evaluated in relation to their expected return and risk. For these are the factors that affect firms valuation in the market place. Include also under the investment decision to relocate capital when assets no longer economically justifies the capital committed to it, the investment decision, then determines that total amount of assets, held, by the firm, the composition of these assets and the businessrisk complexion of the firm as perceived by supplies of capital.

In addition to selecting new investment, a company must management existing assets efficiently, financial managers have varying degrees of operating responsibility for existing assets they are more concerned with management of current assets than with fixed assets.

They are several investments that appear to be promising in future but the risk associated with management accountant to assess the economic and profitability of the investment, may out weigh the intended cash inflow.

Management accounting is an internal business of providing information for competitive decision making. This is done by collecting, processing, and communicating the information to top management in the board of directors to help management, plan, and control, evaluate processes and company strategy to achieve setup objective.

The researcher motivation towards this research topic is to know how investment decision are taken in an organization in order to actualize its futuristic goals. The investment decision of a firm are generally know as capital or longterm investment decision taken in an organization by top management, when they drawup a conclusion that they have setfunds aside to invest in another area of business in anticipation of expected flow of benefit over a series of year.

1.2STATEMENT OF THE PROBLEMS

The following are the problems which where rise to this research work.

The capital required for any investment entails the incurrence of some cost of by investing firm or individual, such costs are variously called interest rate, opportunity cost or return on investment.

Inadequate of infrastructure facilities.

In Nigeria, in particular certain infrastructural facilities are lacking, these include electricity supply, motorable roads, water supply e.t.c

1.3OBJECTIVE OF THE STUDY

This research work aims of highlighting the roles of management accounting for investment decision generally. However in specific terms, the study seeks.

To illustrate how management accounting can be used to calculate cost of capital of a firm.

To evaluate the effects of inadequate infrastructural facilities on investing decision through the application f accounting models