How would you respond to this answer on why capital investments are the most important decisions made by a firm's management?

To begin with we should know what capital investments are. It is the acquisition of physical assets by a company for use in furthering its long-term business goals and objectives. Capital investments should provide better long-term value compared to a good or service that will only be used short-term. For instance, when a company buys land that is often a capital investment.

This is part of the reason why it is considered among the most important decisions made by a firm's management. It will determine the firm's capacity for providing services and commit the firms cash for an extended period of time. They define what a company is all about, the firm's line of business and its inherent business risk.

Capital Investments vary from business to business. It could be machinery, computer equipment, furniture, buildings, etc. The capital used usually comes from a wide range of sources from traditional bank loans to venture capital deals.

Overall, a firm considers this an important decision because it is a key in determining whether a company is profitable and generating value for its shareholders. Without it the risks of a company's failure increases. The risks of not being able to gain fast returns increases.