Financial management underinvestment and overinvestment how to understand

Financial management underinvestment: refers to the abandonment of projects with a positive net present value to the detriment of the interests of creditors and thus reduce the value of the enterprise phenomenon.

Overinvestment: refers to the investment in unprofitable projects or high-risk projects to the detriment of shareholders and creditors and reduce the value of the phenomenon, overinvestment will harm the interests of shareholders and creditors, which should be noted.

There are two main situations in which overinvestment occurs: conflict of interest between the operator and the shareholders, self-interested behavior of the operator will generate overinvestment; conflict between shareholders and creditors, the manager on behalf of the shareholders' interests will be adopted by the low success rate or even negative net present value of the high-risk projects, which will generate overinvestment.

Causes of underinvestment

The problem of underinvestment occurs when the enterprise is in financial difficulties and has a high proportion of debt (i.e., the enterprise has risky debt), the shareholders, if they foresee that adopting a new investment project will compensate the creditors at the expense of their own interests, because of the conflict of interest between the shareholders and the creditors, shareholders lack of motivation to choose the project to invest.

Investment needs to pay attention to what important issues

1. Pay attention to the selection of a good project implementation team No matter how strong your financial strength, the market, the supply of raw materials, how superior the conditions, how advanced the equipment purchased, the project to play a decisive role in the end is still a person, is the implementation of the project team, the core competitiveness exists in the body of the enterprise people, but not in the company's assets itself, the core competitiveness is y rooted in the people, the core competitiveness is y rooted in the people, the core competitiveness is y rooted in the people. Competitiveness is y rooted in human skills, knowledge, personal ability and spirit of cooperation, choose a good project implementation team is far more important than the choice of the project itself, the enterprise project investment must choose a good fit for the project characteristics, project implementation management experience and operational capacity of the project implementation team.

2. Pay attention to the project's pre-analysis of the investment project is a strategic decision-making from the written to the practice of the key step. Enterprises should analyze the feasibility of the implementation of the project from a variety of perspectives, including legal, market prospects, financial and integration of resources. Investment in the pre-analysis is the assumption that the enterprise can be analyzed before the topic, is the basis of the study report, but many of our investment projects do not pay attention to this fundamental work, or this work is only a brief analysis, or even do not do the analysis, today feel like doing, tomorrow began to dry up, typical of the headshot project, which is the project investment and irresponsible practice, so that the result of success is accidental, failure is Inevitably, enterprises should not only pay attention to the project investment in pre-analysis, but also must seriously do detailed analysis, which is the basis of investment projects.

3. Pay attention to the safety of investment projects Only production, product safety, enterprises can survive and develop. Safety, especially human life safety requirements, there is no period of time to mention the existing height, and now there are many popular one-vote veto system, but really can do one-vote veto, I think it is the safety of the enterprise. Safety in the production process is really the first factor to consider in the project investment, including staff operating safety, production environment safety, labor protection safety, product safety, etc., in short, the project investment must pay attention to all aspects of safety.