A) DISTINGUISH INVESTING FROM FINANCING

According to definitions
Investing means Is the situation of current commitment of dollars for a period of
time in order to derive future payments that will compensate the investor for the time
the funds are committed,the expected rate of inflation,and the uncertainty of future
payments(Reilly & Brown,2012) While Financing is the process of providing funds
for business activities, making purchases, or investing.(Investopedia)
According to components
purchases of long-term assets (such as property, plant, and equipment), acquisitions
of other businesses, and investments in marketable securities (stocks and bonds) are
main components of investing activities
while issuing of shares and bonds, borrowing a loan, servicing debt, and buying
back shares are the main components of financing activities
According to Regularity
The cash position from investing activity does not change frequently as the activity
may occur once in a few periods of accounting while in financing There may be
frequent alterations in the cash flow especially if there is repayment of the loan to
be done.
According to Amount of Cash Flow
During investing ,The cash flow is usually huge as the investments made are from
huge entities while During financing,The cash flow is not as huge as investing
activity but repayment can affect the overall profitability
According to Effects/Impacts
Investing activity hugely impacts capital assets while Financing activities hugely
affects capital structure.
B) DISTINGUISH DIRECT VERSUS INDIRECT INVESTMENT
According to definitions
Direct investments are those in which the investor owns the particular assets
himself(using financial markets) while indirect investments are investments made in
vehicles that pool investor money to buy or sell assets( using financial
intermediaries).
According to investment criteria
A direct investor invests in the asset itself, whereas an indirect investor invests in
the expertise of the people using his investment money, notes the National
Association of Real Estate Investment Trusts.
According to management
Under direct investment,A direct investor is wholly responsible for the asset, has
control over it, reaps all of the rewards and assumes all of the risks while Indirect
investment,Indirect investors let others buy and sell the assets, while assuming no
ownership of the assets and taking no responsibility for them, reaping only a share
of any profits that are distributed among all of the indirect investors.
According to classification
Direct investment can be classified by the time horizon of the investment(money
market and capital market instrument) and lastly according to derivative instruments
while indirect investment have got no classification but there can be mutual funds,
pension funda,. They can also be Real estate investment trusts , real estate
investment trusts could use investor money to buy large commercial properties such
as malls, office buildings and hotels.
C) EXPLAIN THE INVESTMENT VEHICLES IN THE INVESTMENT
ENVIRONMENT
Investment environment: refers to the higher level of risk associated with seeking
a higher return from investments. essentially includes all types of investment
opportunities (i.e. varied financial and real assets), investment vehicles,financial
markets, investment process, market structure that enables purchasing and selling of
investments, regulatory set up that fosters an enabling environment to invest, and
market intermediaries.
However,Investment vehicles it is one among the elements of investment
environment,The most important characteristics of investment vehicles on which
bases the overall variety of investment vehicles can be assorted are the return on
investment and the risk which is defined as the uncertainty about the actual return
that will be earned on an investment. Each type of investment vehicles could be
characterized by certain level of profitability and risk because of the specifics of
these financial instruments. The main types of financial investment vehicles are:
short- term investment vehicles; fixed-income securities; common stock; speculative
investment vehicles; other investment tools.

D) EXPLAIN THE INVESTMENT MANAGEMENT PROCESS

According to L. Kristina (2010) Investment management process is the process of
managing money or funds. The investment management process describes how an
investor should go about making decisions.
Investment management process can be disclosed by five-step procedure, which
includes following stages:
● Setting of investment policy.
Investment policy includes setting of investment objectives. The investment policy
should have the specific objectives regarding the investment return requirement and
risk tolerance of the investor.
 ● Analysis and evaluation of investment vehicles.
It involves examining several relevant types of investment vehicles and the
individual vehicles inside these groups. For example, if the common stock was
identified as investment vehicle relevant for investor, the analysis will be
concentrated to the common stock as an investment. The one purpose of such
analysis and evaluation is to identify those investment vehicles that currently appear
to be mispriced.
● Formation of diversified investment portfolio.
Investment portfolio is the set of investment vehicles, formed by the investor seeking
to realize its’ defined investment objectives. In the stage of portfolio formation the
issues of selectivity, timing and diversification need to be addressed by the investor.
Selectivity refers to micro forecasting and focuses on forecasting price movements
of individual assets. Timing involves macro forecasting of price movements of
particular type of financial asset relative to fixed-income securities in general.
Diversification involves forming the investor’s portfolio for decreasing or limiting
risk of investment.
● Portfolio revision
. This step of the investment management process concerns the periodic revision of
the three previous stages. This is necessary, because over time investor with long-
term investment horizon may change his / her investment objectives and this, in turn
means that currently held investor’s portfolio may no longer be optimal and even
contradict with the new settled investment objectives.
● Measurement and evaluation of portfolio performance.
This last step in the investment management process involves determining
periodically how the portfolio performed, in terms of not only the return earned, but
also the risk of the portfolio. For evaluation of portfolio performance appropriate
measures of return and risk and benchmarks are needed. A benchmark is the
performance of a predetermined set of assets, obtained for comparison purposes. The
benchmark may be a popular index of appropriate assets – stock index, bond index.
The benchmarks are widely used by institutional investors evaluating the
performance of their portfolios.

What is components of investment enviroment……………………………………??