Legal Definitions - investment

An investment refers to the act of committing money, capital, or other resources with the expectation of generating a future financial return, profit, or strategic advantage. The primary goal is to increase wealth or achieve specific business objectives over time, rather than for immediate consumption.

Investments can take many forms, including purchasing financial instruments like stocks or bonds, acquiring real estate, or funding business operations and expansion. The intent behind an investment can range from simply earning a passive return to gaining significant influence or outright control over another entity's operations.

• Example 1: Individual Stock Purchase

  Sarah decides to purchase shares in a growing renewable energy company through her brokerage account. She believes that as the world shifts towards sustainable power, this company's value will increase significantly over the next decade, allowing her to sell her shares for a profit or receive dividends.

  This illustrates an investment because Sarah is allocating her personal capital (money) into a financial instrument (stock) with the clear expectation of a future financial gain, either through the appreciation of the stock's value or through dividend payments.

• Example 2: Business Capital Expenditure

  A local bakery chain, "Sweet Delights," decides to invest in a new, high-capacity industrial oven and automated dough-making equipment for its central production facility. This equipment is expensive, but the management anticipates it will significantly increase production efficiency, reduce labor costs, and allow them to meet higher demand, ultimately leading to greater profits.

  This demonstrates an investment because "Sweet Delights" is committing a substantial amount of its capital (money) to acquire a physical asset (equipment) with the strategic purpose of improving its business operations and generating increased revenue and profitability in the future.

• Example 3: Corporate Acquisition for Strategic Control

  TechCorp, a large software conglomerate, acquires a smaller startup called "InnovateAI" by purchasing over 70% of its outstanding voting shares. TechCorp's goal is not just financial return, but to integrate InnovateAI's cutting-edge artificial intelligence technology into its own product line and gain full control over its research and development direction, eliminating a potential competitor and expanding its market dominance.

  This exemplifies an investment where TechCorp is allocating significant financial resources to acquire a controlling stake in another company. The investment's purpose extends beyond mere profit to include strategic objectives like gaining control over valuable technology, influencing business policies, and enhancing its own market position.