What are the different types of major capital investments?
Major capital investments can be classified by type of industry. Historically, major capital investments were primarily equipment and machinery based projects. Over the past 20 years, as the United States has become more technology based, major capital investments now include product development, research & development and market development. Nowadays, technology companies recruit and pay salaries to talented technologists who can create new algorithms and intellectual property. This type of project may not always fit the traditional definition of a capital investment and may not always be capitalized on the balance sheet. Yet, large scale investments in new products and new IP are critical to the launch and growth cycle of a new company. Within the technology sector, major capital investments usually consist of product development and then delivery infrastructure build out. The product can be new software or a technology enabled service. The delivery infrastructure can be hardware and bandwidth required to deliver and host the application for the client. In the virtualized world of IT, companies often make major capital investment in their offshore delivery operations. Capital investments also include funding for new distribution channels and market expansion. An acquisition is a common form of capital investment, and often brings new products, customers and markets to the acquirer. Strong companies bring disciplined planning and measurement to capital investments, ensuring an acceptable hurdle rate of return. Capital investments, if not properly measured, can lead to subpar returns and possible write offs.