Question

I think that investors look at NPV and IRR (or any other data they are evaluating) as indicators of their own assessment of a project or investment.They can calculate the risk and return of the investment.When the investor finds out that his investment will bring negative NPV, he will cancel the investment. They will invest in the project when all the metrics are met. How do you think? Or do you have opposite view?

Answer 1

Yes I agree with the statement that NPV and IRR are primerly looked after before making an investment , but that's not all , apart for this few short term investors look for P/E ratio which indicates whats the earning with respect to the price of investment made. They too look after ROE ( Return on investment) this determines what is the return ultimately recieves from an investment .

Apart there are few more important financial ratio which is considered by a long term investors like Asset turnover ratio which tells how much asset a company have and what turnover it is making using those assets. This give a clear idea as how much value those assets deliver for the company.

Depending on the type of industry an investment is also made like seasonal or if it's a technologically advance company that gives an idea as if the investment made taking care of aseet to liability or Divident to earning will deliver result in how much time .