-Business investements refers to businesses using money to generate wealth and income, this implies that money increases for the business without labour effort.
-Businesses make use of investment managers to make sure that the business's money is invested in the best possible way.
-Businesses invest surplus funds which enable businesses to generate passive income as well as ensure that business operations are runned efficiently.
-Therefore, businesses need investments in order to allow the enterprise to generate major income as well as ensure the succesful running of a business.
Why do businesses need investments
-Businesses need to invest in trading stock
-Businesses need to invest in vehicles, machinery and equipment to enable the business to operate efficiently.
-Businesses need to invest in land and buildings so that the business can expand.
-Businesses need to invest in new markets to increase market share.
-Businesses need to invest surplus funds to generate income. Businesses need income mainly for three reasons. They are:
A) The transaction motive: to have money available to pay expenses such as salaries and wages and water and electricity.
B) The precautionary motive: to have money available to pay for unforeseen expenditures, such as sudden increase in the interest rate.
C) The speculation motive: to have money available to invest in opportunities that may suddenly arise.
Different Investment Options
1)Linked Rate Deposits: - A short term investment account compromising a single deposit for a fixed term at an interest rate that in linked to the prime rate.
-Prime Rate: The interest charged by banks to their most credit worthy clients.
-Repo Rate: The interest rate charged by the Reserve Bank to commercial banks. The Reserve Bank only makes a limited amount of credit available and this determines the repo rate. If the bank requires more credit that what is available, the repo rate will increase.