Theory of Capital and Investment

Theory of Capital and Investment: Capital is the foundation of a business. Like other factors of production, capital is also a scare mad expensive factor of production. Under the conditions, given of capital investment requires utmost care and diligence. Capital should be allocated in most efficient manner. Any wrong step will harm the growth profile of the firm and weaken it in future. Theory of capital and investment explains the following important issues- selecting of most suitable investment project, most efficient allocation capital, assessing the efficiency of capital, minimizing the possibility of under- capitalization or over capitalization.