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One of many classifications is as follows,

• Enlargement of current enterprise

• Expansion of new business

• Replacement and moderation

Expansion and Diversification

A company could add capacity to its present product lines to increase current operation. For instance, the Company Y could increase its plant capacity to fabricate more "X". It is an instance of related diversification. A firm might increase its activities in a new business. Enlargement of a new business requires funding in new products and a new kind of production activity within the firm. If a packing manufacturing firm invest in a new plant and machinery to produce ball bearings, which the firm has not manufacture earlier than, this represents expansion of new enterprise or unrelated diversification. Sometimes an organization acquires present firms to expand its business. In either case, the firm makes investment in the expectation of additional revenue. Investment in current or new products may additionally be called as income growth investment.

Replacement and Modernization

The primary goal of modernization and replacement is to improve working efficiency and reduce costs. Price financial savings will mirror in the increased profits, however the firms revenue might remain unchanged. Assets grow to be outdated and out of date with technological changes. The firm must resolve to switch these assets with new assets that operate more economically. If a Garment firm adjustments from semi computerized washing equipment to completely automated washing equipment, it is an example of modernization and replacement. Replacement choices help to introduce more environment friendly and economical assets and therefore, are additionally called cost reduction investments. Nevertheless, replacement selections that contain substantial modernization and technological improvements increase revenues as well as reduce costs.

One other helpful way of classify investments is as follows

• Mutually unique investment

• Independent investment

• Contingent investment

Mutually unique funding

Mutually exclusive investments serve the identical objective and compete with every other. If one investment is undertaken, others will should be excluded. An organization might, for example, either use a more labor intensive, semi automated machine, or make use of a more capital intensive, highly computerized machine for production. Selecting the semi-automatic machine precludes the acceptance of the highly automatic machine.

Independent funding

Unbiased investments serve different functions and don't compete with every other. For instance, a heavy engineering firm could also be considering expansion of its plant capacity to fabricate additional excavators and addition of new production facilities to manufacture a new product light commercial vehicles. Relying on their profitability and availability of funds, the company can undertake each investments.

Contingent investment

Contingent investments are dependent projects; the selection of one funding necessitates undertaking one or more other investment. For example, if a company decides to build a factory in a remote, backward area, it might should invest in houses, roads, hospitals, and lots of more. For employees to draw the work force thus, building of factory also requires investment in facilities for employees. The total expenditure will be treated as one single investment.

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