Non-Financial Factors in Capital Investment Decisions

The summary is as follows: Managerial accounting plays a crucial role in making capital investment decisions. Non-financial factors like reputation, environmental issues, and employee morale are now considered more important than they were 20-25 years ago. Top-level management, such as CEO, CFO, and COO, make capital investment decisions due to their long-term impact on the company's performance and growth. These decisions involve high risk and require consideration of various tangible and intangible factors before a decision is taken.

Running head- Managerial Accounting
managerial accounting

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Managerial Accounting
Answer 1.
Some non-financial factors that are considered more important than they were considered in the
past 20-25 years ago in capital investment decisions are as follows:
The reputation of the firm – now the main thing depend is on the reputation that is the reputation
of the firm now a day become vital and central to capital investment decision (Graham et al.,
2015). Capital investments that could enhance the firm’s reputation are preferred over other
projects.
Environmental issues – the huge impact of capital investment decision is found on the
environment. So it is also considered as an important non-financial factor in making a capital
investment decision. As nowadays only economy and environment-friendly capital investment
project are demanded.
Morale of employees – The decision to accept or reject a capital investment project also depends
upon the effects of the decision over employees' morale. That is whether the employees' want to
be associated with such project or not.
Answer2.
Mainly all the capital investment decisions are taken by the top level management like the CEO,
CFO and COO levels of executives. As capital investment decision have a long-term impact on
the company performance and growth, and it is not simple to take a decision, and neither is it
taken by the operational manager.

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Managerial Accounting
Capital investment decisions are not simple as it is very critical as the decision regarding capital
investment is choosing the correct investment opportunity that will provide maximum return on
the investment (Faccio et al., 2016). Capital investment decision is associated with high risk also
so it is not only the calculation of return , the top management need to take into consideration the
risks associated with each investment and the sensitivity to economical , technological and social
change, the alignment with vision and mission statement of the company , the alignment with
ethical standards and code of the company , the social and environmental impact of the
investment, acceptability of the investment to the shareholders , impact of investment on the
brand image , all these tangible and intangible factors need to be considered before a capital
investment decision is taken. The future financial parameters and the market value of the
company depend on the future cash flows receivable from the investment. Hence, such critical
and high impact capital investment decisions are taken by top-level management or C level
executive.

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Managerial Accounting
References.
Graham, J. R., Harvey, C. R., & Puri, M. (2015). Capital allocation and delegation of decision-
making authority within firms. Journal of Financial Economics, 115(3), 449-470.
Faccio, M., Marchica, M. T., & Mura, R. (2016). CEO gender, corporate risk-taking, and the
efficiency of capital allocation. Journal of Corporate Finance, 39, 193-209.