Qualitative factors affecting investment decisions

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  • Non-numerical, Qualitative factors affect Investment Decisions
    • Corporate Image can influence investment decisions
      • Good corporate image brings customer goodwill and loyalty in the long term and the firm could consider this more important than short-term rate of return on investment
        • Investment decisions creating bad publicity and damaging customer loyalty will damage profits long term
      • A firm with green, eco-friendly image would avoid investments damaging the environment
        • Some firms incorporate environmental costs into their investment appraisals
    • Business Objectives and Strategy can influence investment decisions
      • A business aiming to produce low cost products for mass market would be unlikely to invest much in research and development etc.
      • An investment appraisal recommended purely on financial data might not fit in with the objectives of a firm
        • Many businesses only make an investment if the project will help to achieve their objectives
    • Industrial Relations can influence investment decisions
      • Loss of jobs affects staff morale
        • Cost of redundancy payments should be factored into the decision
        • Trade unions may strike over job losses, which would affect productivity
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