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Capital Investment Decisions - Assignment Example
Finance & Accounting
Pages 6 (1506 words)
Capital Investment Decisions Capital Investment Decisions 1. The recently introduced changes in the lending regulatory environment, specifically with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, have significantly impacted banks’ ability to lend money to businesses for capital projects and acquisitions…
The stated aim of this recently introduced legislation is “to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail’, to protect the American taxpayer by ending bailouts, to protect consumers from abuse financial services practices, and for other purposes” (GPO, n. d.). Even though this Act was passed with intent to protect the nation from another financial crisis, it adversely affects banks’ ability to extend financial assistance to various business sectors. This legislation noticeably reduces banks’ lending limits. For instance, the Act strictly requires banks not to lend money to risky projects or business organizations that are less likely to repay debts. Often, it cannot be possible to accurately evaluate the potentiality of capital projects or business acquisitions because those ventures depend on a set of uncertain future events. According to the American Bankers Association (2012), this Act has limited price thresholds for certain lending segments and framed new disclosure forms and procedures for all types of mortgages. As a result, large business corporations would face potential challenges in meeting business expansion needs timely. ...
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