Introduction to Investment Evaluation

In this chapter, the reader will deal with the basics of investment evaluation. The aim is to make the reader aware of what exactly the business administration discipline’s theoretical area of “investment theory” covers and on which assumptions the academic model simplifies the complex reality in order to obtain a decision. The goal of investment evaluation will be elaborated and the knowledge should be gained that it is an academic model, whose results are not identical to reality, but are to be interpreted in consideration of the assumptions made. In detail, the following goals should be achieved in this section: The relevance of the investment calculation is to be documented and evaluated with empirical information from the point of view of the national economy, companies and private households. The goal of investment calculation should be worked out. Thereby, different possible questions and asset concepts, which can belong to the aim of an investment calculator, are presented. The investment calculation is to be differentiated from other business management studies of internal accounting. The different groups of investment calculation methods are distinguished from each other, the individual methods are assigned to the groups. The reader should be made aware of the importance of the various investment calculation methods, taking into account their chronological development and the computing capacities available at that time. Ideal-typical organisational systematisation for the allocation of investment-calculating instances in a company are discussed depending on the size of the company and the capital commitment through investments. The process organisation of the investment calculation is discussed in detail, The problems of data collection and the consequences of the obtained results for realistic representation are discussed and. The general purpose and the operational benefit of the investment calculation are discussed in principle. After reading the chapter, the reader should be able to define what investment calculation is, what it means from different perspectives, what its goal is, what different procedures exist and what its limitations are.