Investments

This account contains a sum of book (‘contract’) values of all of your investments into illiquid equity securities (typically called ‘direct’ or ‘private’) equity.

If your company is not an investment fund (which in most cases it isn’t), you must restrict your investments to cases when they are needed from your operational perspective. For example, you might want to buy a minority stake in your key distributor or another partner to exert the necessary influence on their strategic decisions. Otherwise, you must invest into your core business operations, projects and activities.

The objective of any investment is, obviously, to generate the maximum amount of financial value for your company. Therefore, you must always consider the ‘hold/sell’ alternative from NPV and IRR perspective. Which requires developing, updating and comparing on a regular basis financial models for each option.