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One of many classifications is as follows,

• Growth of present enterprise

• Enlargement of new business

• Replacement and moderation

Growth and Diversification

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

Replacement and Modernization

The primary objective of modernization and replacement is to improve working effectivity and reduce costs. Price savings will mirror within the elevated profits, but the firms income might remain unchanged. Assets turn out to be outdated and obsolete with technological changes. The firm must resolve to exchange those assets with new assets that operate more economically. If a Garment company modifications from semi automated washing equipment to fully computerized washing equipment, it is an example of modernization and replacement. Replacement decisions help to introduce more efficient and economical assets and subsequently, are also called value reduction investments. Nevertheless, replacement decisions that contain substantial modernization and technological improvements increase revenues as well as reduce costs.

Another helpful way of classify investments is as follows

• Mutually unique investment

• Impartial funding

• Contingent investment

Mutually unique investment

Mutually exclusive investments serve the identical function and compete with each other. If one funding is undertaken, others will must be excluded. A company might, for instance, either use a more labor intensive, semi automated machine, or make use of a more capital intensive, highly automatic machine for production. Choosing the semi-automatic machine precludes the acceptance of the highly automated machine.

Impartial investment

Independent investments serve totally different purposes and do not compete with every other. For example, a heavy engineering firm could also be considering growth of its plant capacity to manufacture 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 corporate 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 distant, backward area, it may need to put money into houses, roads, hospitals, and lots of more. For workers 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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