Investment goal. Economic essence, significance and goals of investment Goals and directions of investment
Introduction………………………………………………………………………………………...3
Reasons, significance and goals of investment in a market economy………….4
Conclusion………………………………………………………………………………….16
References……………………………………………………………17
INTRODUCTION
Investment is the investment of capital, financial resources in programs and projects, entrepreneurship, securities, from which it is expected to receive income exceeding costs.
Investments are the most important and scarce economic resource, the use of which contributes to the growth of production efficiency and competitiveness of enterprises, the creation of new jobs, increased e reducing the employment of the population and the level of its well-being. Successful operation of enterprises in the long term, ensuring high rates of their growth h developments are largely determined by the level of investment activity O ity and scale of investment activity, the expansion of which e will create special conditions, and first of all, increasing the volume of investments and increasing their efficiency in news.
The term "investment" in Russia began to be widely used during the years of market e forms The most common and frequently encountered concept of investment is the long-term investment of cash and other capital in one’s own country or abroad in objects of various deeds. I activity, entrepreneurial projects, socio-economic programs m we, innovative projects for the purpose of generating income or up to With achieving other beneficial effects.
Thus, investments express all types of property and inte l intellectual values that are invested in objects of the investment sphere with e I want to obtain economic (profit) and social effects. 1
REASONS, IMPORTANCE AND OBJECTIVES OF INVESTMENT IN A MARKET ECONOMY
In any economic system, investments create additional conditions for the development of fixed capital, which, being a specific form of manifestation of the results of scientific and technological progress, predetermines the possibility of economic development.
The deformed investment model that emerged in the Russian economy was characterized by the isolation of the financial and real sectors of the economy and ineffective investment infrastructure as links in the mechanism for transforming savings into investments.
The purpose of investing is to search and determine a method of investment that would ensure the required level of profitability and min. and low risk.
An important component of investing is to maximize your investment. n new funds. It is difficult to judge in absolute terms the degree of profitability of alternative investments, so it is advisable to use T nominal value - profitability.
Profitability is defined as the ratio of the total cash flow from investment e stationary object to investment costs. The total cash flow will consist of the final price (sale price of the investment), initial price (purchase price of the investment), as well as income, to O which the investor receives in the form of dividends when purchasing shares or in the form of interest, which he receives and n investor purchasing a bond.
Another component is risk. In investment activities there is a danger of monetary losses. When investing in a particular investment object, an investor can only with a certain degree of confidence n ability to predict future return on investment. The investor understands perfectly well that the return on investment he expects may at significantly different from the actual return that will be observed after the investment n new period. Let's say he purchased shares in the hope of rapid growth in their price. e us, but in fact the price of the shares decreased and changed accordingly O stock performance. Actually, the investor does not have a 100% guarantee at calculation of the planned income from investments and forms the basis of investment risk And tion activity.
Market transformations in Russia have led to a revision of the basic models of the investment process.
Now, in addition to the state, it includes various structures: domestic and foreign legal entities and individuals who can act as direct or portfolio investors, as well as economic entities promoting investment - commercial banks, financial institutions, equipment suppliers, export insurance agencies loans, information and consulting firms. 2
New economic conditions have changed the state investment policy, the main task of which is to create a favorable investment climate for the growth of investment activity, providing support to competitive industries and infrastructure facilities.
In the state policy of activating investment sources, two directions have emerged.
First, the improvement of traditional sources: enterprises’ own funds, depreciation deductions, budget funds, targeted loans, funds from extra-budgetary funds.
The second direction is associated with the development of new sources: medium-term loans from commercial banks, funds from the issue of shares of enterprises, funds from pension, insurance and other non-state funds.
The formation of an investment support system at the macro- and meso-level is inextricably linked with the transformation of Russian economic regionalism (with the strengthening of the power vertical, the redistribution of resources and powers in favor of the federal center, the further expansion of big business into the regions, the growing influence of transnational network structures, etc.) and is accompanied by a deepening asymmetries in the subject, sector and territorial context, increased competition for investments, actualizes the search for effective forms and mechanisms of investment support for the Russian meso-economic periphery.
In the decentralization of investment provision, there was an expansion of the independence of business entities in the use of investment resources, as well as a redistribution of part of the property rights at the meso- and micro-level.
The formation of regional investment resources began at the expense of the profits of enterprises and organizations coming through taxes and contributions to local budgets and extra-budgetary funds.
The development of regional supply had its own difficulties: in some regions, investment programs were suspended, as a result of which the volume of unfinished construction increased, others found themselves in a difficult situation due to the concentration of capital-intensive and low-profit industries in them, and still others - oil and gas producing regions, using government support, managed to intensify the investment process and improve the socio-economic situation.
Analysis of funding sources allows us to identify regional features of investment support and determine why the investment situation in some regions has developed more favorably than others. Regional investment has two main sources: the own funds of the constituent entities of the federation (profit, depreciation, on-farm reserves, funds paid by insurance authorities) and attracted funds, which in turn can be budgetary (of the Russian Federation and the region) and extra-budgetary.
Extra-budgetary funds include: enterprises’ own funds, borrowed funds, funds from extra-budgetary funds, individual developers, foreign investments, specific funds.
As a result of decentralization of funding sources in 1990-2003. investments in fixed capital decreased by more than 4 times. From 1996 to 1999 In the financing of investments in Russia, the share of enterprises’ own funds predominates, and the share of borrowed and raised funds is decreasing.
The funds raised from the federal budget dominate in 95% of regions. Since 1998, the situation has changed: the number of regions with a predominance of raised funds is growing. The importance of state target programs and national projects grew.
In 2000-2008 Federal budget funds predominate in the volume of funds raised in 54-66% of regions, and the volume of funds from regional budgets is constantly decreasing, and the share of other funds raised (funds from the issue of shares of enterprises, funds from pension, insurance and other non-state funds) is increasing. The share of bank loans in raised funds is increasing and by 2008 they dominate budget funds in 15 regions, mainly from the Central District. All this indicates the strengthening of extra-budgetary sources of investment support for the regions. 3
The Russian economy, including through foreign investments, developed in the direction of a raw materials appendage of industrialized countries, and its economic and financial systems became hypersensitive to fluctuations and speculative transactions in world stock markets, which became evident during the financial crisis in Southeast Asia. and in Russia in the summer of 1998.
In transition economies, a necessary condition for investment growth, as a rule, is an increase in the savings rate; for example, in Eastern European countries, the main problem of activation was the search for additional resources for investment (through reducing government spending, stimulating corporate savings, increasing exports), since in these countries the savings rate was 4-5 percentage points below the savings rate.
The investment support system in Russia consists of a limited unity of sources and methods of financing (budgetary, credit, combined and self-financing). The structures that implement these methods are various market entities: investment funds, commercial banks, two-level budgets, enterprises, foreign investors.
In the context of globalization, which has intensified in Russia in the process of market transformations, there is a separation of investment institutions from the expanded reproduction of fixed capital (the real sector of the economy).
There is a qualitative shift in the socio-economic structure of capital and property. Now priority belongs to investments, and therefore to financial capital, rather than to productive capital.
Financial capital as a new basis of the economy has made productive potential functionally dependent on the volume and structure of strategic investments, regardless of the origin of financial resources (internal or external).
Investing in Russia is an area that is going through a period of formation. The main large investors today are foreign companies. Our investment sector suffers from low quality management, the lack of a specific operating methodology, and underdeveloped legislation protecting the rights of investors. But, despite these shortcomings, the institution of investment in Russia has recently become an area of increased attention of both domestic and foreign investors.
The most popular investment areas in Russia traditionally remain oil, gas and metal mining. But recently there has been a tendency towards an intensive increase in investor interest in the Russian information technology industry.
Enterprise investment is important. In the development of many modern enterprises, investments in production are of great importance, which make it possible to update technical equipment, install modern devices for the production of certain products, and also reconstruct the entire enterprise as a whole.
At the same time, the influx of capital will allow enterprises:
- significantly improve production equipment;
- use more modern technologies;
- improve the quality of products
- create new markets.
A special place is occupied by venture investment in enterprises, which makes it possible to develop new, high-tech industries. In this case, investors should be aware of the high degree of risk of such investments.
The purpose of investing in enterprises is to make a profit, while investing in an enterprise may involve several ways of investing capital:
- acquisition of ownership of the entire enterprise;
- investing funds in the authorized capital;
- purchase of shares or other securities;
- acquisition of equipment, licenses, trademarks and other property.
The right path for the development of an enterprise is the basis of strategic management, which requires a clear, developed mechanism for the organization’s work in the current economic conditions. Factors influencing the level of policy of an investment organization primarily depend on the activity of investments in the economy of our country, these are the level of inflation and taxes, the low performance of investments, as well as an increase in investment risk.
The key principles of investment enterprise policy are to identify the size, direction and organization of investments for a more effective result. Analyzing the type of activity of an enterprise, one can see two clearly defined types of investment policy - capital-forming capital in portfolio investments, investments and investments. Both policy directions have their own implementation characteristics. Based on this, for the normal functioning of the policy of an investment organization, regular research is necessary in the internal and external spheres of the enterprise to determine needs, search and develop investment prospects.
As part of the development of the financial economy, the state acquires the properties of one of the macro-subjects of this economy.
Together, they form a market for strategic investments, which creates a message of economic growth that extends to all areas and levels of the market.
The strategic investment market is becoming a function of intensifying the process of Russia's inclusion in globalization.
Their economic efficiency depends on the sectoral and territorial (regional) structure of capital investments. The following stages were identified in the development of the investment structure in the transition period.
The first stage - “creative destruction” - before the financial crisis of 1998 (reduction of investment expenditures) - was characterized by intense structural breakdown: the share of the production sector in investments fell from 56.7 to 40.5%, but the share of transport and communications, trade increased , service sector, which was not typical for the Soviet period of investment development.
The second stage - after 1998, the share of industry in the investment structure increased sharply due to the fuel component, while manufacturing industries fell, and in 2001-2003. The growth rate of investment in mechanical engineering has increased noticeably. A feature of the investment boom was the rapid growth of investments in the overhaul of outdated equipment.
The third stage - from 2003. The distribution of investments by economic sectors has changed: the share of investments in the fuel and food industries decreased slightly, in trade and finance it stabilized, and in transport it steadily increased, which corresponds to global trends. 4
Analysis of investment support at the meso level includes sectoral and regional aspects.
The latter is very important for Russia due to the vastness of the territory, the diversity of conditions, and the lack of a clear regional policy.
As a result, in the process of market transformation, differentiation of the investment climate was observed, increasing the uneven regional distribution of domestic and foreign capital.
Over the years of reforms, Russia has failed to attract either the expected volumes or ensure the proper “quality” of foreign capital. In general, the volume of foreign direct investment in the Russian economy was insignificant and characterized by unstable dynamics, since in relations with other countries
Russia relied on insufficient competitive advantages (mainly natural resources).
According to UNCTAD estimates, Russia is classified as a group of countries with a high potential for attracting FDI and low inflows. The country has not yet managed to turn the influx of FDI into an effective factor in activating the investment process. It lags behind the world average and a number of “emerging markets” in terms of the share of accumulated FDI in GDP.
The basic basis of the globalization process is trade, economic and financial integration. This was also reflected in the types of foreign income to Russia: since the late 90s. a large share of foreign investments is occupied by other investments, and at the expense of trade and other loans.
There is a mesoeconomic aspect to the distribution of FDI.
Thus, in the Primorsky Territory, almost two-thirds of accumulated FDI is carried out by firms from Japan, the Republic of Korea, the USA and China. In 1998, Russia became a full member of APEC, of which 20 other states are members (the vanguard is the USA, Canada, Japan; NIS: Indonesia, Thailand, South Korea, Singapore, Hong Kong, and China). This is also facilitated by the complementarity of economies: the APEC region is rich in raw materials and sources of capital and modern technologies necessary for Russia. Russia is included in integration processes thanks to its resources, technology, commercial and fishing fleet, telecommunications and recreational potential. And the territorial proximity of the countries of the region and the Far Eastern regions of Russia promotes economic partnership, in particular, due to savings on transport costs.
The territorial distribution of foreign investment is largely determined by: 1) the comparative advantages of the regions, their availability of traditional basic factors of production (abundant natural resources, cheap skilled labor, concentration of industries using them); 2) competitive advantages of regions (scientific, technical and infrastructural potential, development of market institutions).
For foreign investors from distant countries, the decisive factor is the economic leadership and infrastructural development of the territory of Moscow and the region. There are many research and production complexes and experimental production facilities located in the Moscow region. Here is the highest concentration of “science cities” in Russia.
Therefore, the territorial distribution of FDI was distinguished by its concentration (almost 80%) in the Central District, St. Petersburg, Sverdlovsk and Tyumen regions. An analysis of the supply of foreign investment showed that foreign investors are attracted by large industrial and resource-extracting regions, as well as the high diversification of their industry.
For territorially close states, the neighborhood effect allows saving on transport costs (assembly from foreign components), informing potential investors participating in foreign trade in border areas, as well as coordinating and managing from the head enterprise.
Therefore, the first investments of TNCs from neighboring countries are already placed in large cities of border regions, and not in Moscow: in the Pskov region, FDI from Estonia and Latvia predominates, in Karelia - from Finland, and Swedish, Danish, Dutch and British investors prefer North- Western Federal District. Which requires developed production and transport infrastructure.
In the 90s The world has undergone major changes in the field of production infrastructure.
A new stage in infrastructure development required gigantic investments (4-6% of GDP), the source of which increasingly became private capital, while maintaining the position of the state. It is this aspect that requires in Russia the differentiation of financial incentives by region and the development of public infrastructure investments. State support for infrastructure and its investment leads to private investment.
Interregional differences in the flow of FDI are associated with patterns in the choice of the first locations of enterprises and further directions of diffusion of foreign capital. The regional strategies of almost all investors from EU countries are described by hierarchical wave diffusion schemes (except for raw material extraction projects), which leads to a gradual decrease in the territorial concentration of foreign businesses in Russia.
An analysis of the specifics of the development of the Russian market by foreign firms showed that shifts in investment ties between Russia and the EU are determined not only by changes in the investment climate in the regions and the country as a whole, but also by the action of general patterns of spatial diffusion of foreign capital investments: the number of regions-objects of FDI is growing, the sectoral structure of FDI, new forms of investment interaction appear.
Thus, the modern system of investment support for Russian regions is characterized by the instability of the processes occurring in it, a combination of elements of the old and new models, which fundamentally distinguishes it from stationary regional economies. 5
CONCLUSION
Investments play a very important role in the economy. Basic ass A hours, which is stimulating economic development and ensuring With sustainable economic growth.
Continuous investment contributes to the highest degree to maintaining stable economic development as a and of the invested enterprise or organization individually, and of the entire state as a whole.
Thus, investments guarantee constant and e rapid development of organizations in the long term, increasing the efficiency n reliability and competitiveness of their products on the market, which in turn e which ensures the creation of new jobs and a reduction in the unemployment rate And tsy, increasing the well-being of the population and improving its standard of living.
The development of the economy of the entire state guarantees the solution of such problems as environmental problems, health care, development of the education system and others.
In today's difficult global economic situation, many organizations A nizations and private investors are afraid to invest capital in various projects O projects that hinder the establishment of stability and economic development. 6
REFERENCES
1 Rodimkina A.M. Russia. Economy and Society. - St. Petersburg: Zlatoust Publishing House. - 2007. - 160 p.
2 Korchagin Yu. A. Modern economics of Russia. Rostov-on-Don: Phoenix Publishing House. - 2008. - 672 p.
3 EU and Russia: from direct investment to investment cooperation / Rep. ed. A.V. Kuznetsov. Institute of World Economy and International. relations of the Russian Academy of Sciences. - M.: Nauka, 2008. - P. 47-49.
4 Evstigneeva L.P. Economic growth: a liberal alternative. Institute of International econ. and watered. research RAS. - M.: Nauka, 2005. - 482 p.
5 Druzhinin A.G., Dzhurbina E. Regional paradigm of economic development: the factor of interbudgetary transfers. - Rostov-on-Don: RSU Publishing House, 2005. - P. 14-50.
6 Grebnev L. S. Economics. - M.: Logos Publishing House. - 2010. - 408 p.
PAGE \* MERGEFORMAT 3
2. Economic essence, significance and goals of investment.
Investments are cash, targeted bank deposits, shares, shares, etc. Central Bank, technology, machinery, equipment, licenses, incl. trademarks, loans, other property or property rights, intellectual values invested in objects of entrepreneurial and other types of activities in order to make a profit and/or achieve a positive social effect (law on investment activities in the Russian Federation)
Investment activity – investment or investment and a set of practical actions for the implementation of investments.
The concept of the current value of a flow and its use in assessing the effectiveness of investments.
$fv iNature and types of investments
1.
Financial
2.
Direct investments
Indirect
3.
Gross Investment
Renovation investments
Net Investment
4.
Derivatives
Autonomous
5.
Domestic
External investments
6.By period of implementation:
Short-term investments
Long-term investments
7.:
Independent Investments
Interdependent Investments
Mutually exclusive investments
8.By level of profitability:
Highly profitable investments
Average income investments.
Low-yield investments.
Non-income investments.
9.
Risk-free investment.
Low risk
Medium risk - y
High risk investmentsspeculative investment,
10.By liquidity level:
Highly liquid investments.
Medium liquid
Low liquid investments.
Illiquid investments
11.
Private investment
Public investment
Mixed investments
12.
Primary Investment
Reinvestment
Disinvestment
13.
Domestic
Foreign investment
14.:
15.
Nature and types of investments
Investments in various types and forms have penetrated so deeply into our daily lives that many people, even those not directly associated with investing, have a general understanding of what investing is. The essence and types of investments differ somewhat among different authors. Let's focus on this definition of investment:
Investment is the investment of capital in any form (property, money, securities, etc.) in economic objects to make a profit or solve any social problems.
Let's consider the enterprise's investments in accordance with their classification according to the main characteristics:
1.By objects of capital investment:
Real (capital-forming) characterize capital investments in the reproduction of fixed assets, in innovative intangible assets (innovative investments), in the increase in inventories of goods and materials and other investment objects related to the implementation of the operating activities of the enterprise or improving the working and living conditions of personnel.
Financial characterize capital investments in various financial investment instruments, mainly in securities with the aim of generating income.
2.By the nature of participation in investment activities:
Direct investments imply the direct participation of the investor in the selection of investment objects and the investment of capital. Typically, direct investments are carried out by directly investing capital in the authorized capital of other enterprises. Direct investment is carried out mainly by trained investors who have fairly accurate information about the investment object and are well acquainted with the investment mechanism.
Indirect characterize the investor’s capital investments mediated by other persons (financial intermediaries)
3.In terms of reproduction:
Gross Investment characterize the total amount of capital invested in the reproduction of fixed assets and intangible assets in a certain period. In economic theory, the concept of gross investment is usually associated with the investment of capital in the real sector of the economy. At the enterprise level, this term refers to the total amount of invested capital in a given period.
Renovation investments characterize the amount of capital invested in the simple reproduction of fixed assets and depreciable intangible assets. In quantitative terms, renovation investments are usually equated to the amount of depreciation charges in a certain period.
Net Investment characterize the amount of capital invested in the expanded reproduction of fixed assets and intangible assets. In economic theory, this term refers to net capital formation in the real sector of the economy. In quantitative terms, they represent the amount of gross investment reduced by the amount of depreciation charges for all types of depreciable capital assets of the enterprise.
4.By degree of dependence on income:
Derivatives directly correlate with the dynamics of the volume of net income (profit) through the mechanism of its distribution between consumption and savings.
Autonomous characterize capital investment initiated by the action of factors not related to the formation and distribution of net income (profit), for example, scientific and technical progress, environmental measures and others.
5.In relation to the enterprise investor:
Domestic characterize the investment of capital in the development of operating assets of the investor’s enterprise itself.
External investments represent the investment of capital in real assets of other enterprises or in financial investment instruments issued by other business entities.
6.By period of implementation:
Short-term investments characterize capital investments for a period of up to one year. The basis of an enterprise's short-term investments are its short-term financial investments.
Long-term investments characterize capital investments for a period of more than one year. The main form of long-term investment of an enterprise is its capital investment in the reproduction of fixed assets.
7.By implementation compatibility:
Independent Investments characterize capital investments in such investment objects (investment projects, financial instruments) that can be implemented as autonomous (independent of other investment objects and not excluding them) in the general investment program (investment portfolio) of the enterprise.
Interdependent Investments characterize capital investments in investment objects, the priority of implementation or subsequent operation of which depends on other investment objects and can only be carried out in conjunction with them.
Mutually exclusive investments As a rule, they are analog in nature in terms of the purposes of their implementation, the nature of the technology, product range, and other basic parameters and require an alternative choice.
8.By level of profitability:
Highly profitable investments characterize capital investments in investment projects or financial instruments, the expected level of net investment profit, for which it significantly exceeds the average rate of this profit in the investment market.
Average income investments. The expected level of net investment profit for innovative projects and financial investment instruments of this group approximately corresponds to the average rate of investment profit prevailing in the investment market.
Low-yield investments. For this group of investment objects, the expected level of net investment profit is usually significantly lower than the average rate of this profit.
Non-income investments. They represent a group of investment objects, the choice and implementation of which the investor does not associate with the receipt of investment profit. Such investments, as a rule, pursue chains of obtaining social, environmental and other types of non-economic benefits.
9.By level of investment risk:
Risk-free investment. They characterize investments in such investment objects for which there is no real risk of loss of capital or expected income and the receipt of an estimated real amount of net investment profit is practically guaranteed.
Low risk characterize capital investments in objects, the risk of which is significantly lower than the market average.
Medium risk - y The level of risk for investment objects approximately corresponds to the market average.
High risk investments. The level of risk for investment objects of this group usually significantly exceeds the market average. A special place in this group is occupied by the so-called speculative investment, characterized by investing capital in the most risky projects or investment instruments for which the highest level of income is expected.
10.By liquidity level:
Highly liquid investments. These include such objects (instruments) of an enterprise's investment that can quickly be converted into cash (within up to one month) without significant losses in their current market value (short-term financial investments).
Medium liquid characterize a group of enterprise investment objects that can be converted into cash without significant losses in their current and market value within a period of one to six months.
Low liquid investments. These include objects (instruments) of investment of an enterprise that can be converted into cash without loss of their current market value after a significant period of time (from six months or more). The main type of such investments are unfinished investment projects, completed investment projects with outdated technology, and shares of individual little-known enterprises not quoted on the stock market.
Illiquid investments characterize investments that cannot be sold independently (they can be sold on the investment market only as part of an integral property complex).
11.By type of ownership of invested capital:
Private investment characterize capital investments of individuals, as well as legal entities of non-state forms of ownership.
Public investment characterize capital investments of state enterprises, as well as funds from the state budget at its various levels and state extra-budgetary funds.
Mixed investments involve investments of both private and public capital in the investment objects of the enterprise.
12.By the nature of the use of capital in the investment process:
Primary Investment characterize the use of capital newly formed for investment purposes at the expense of both own and borrowed financial resources.
Reinvestment represent the reuse of capital for investment purposes, subject to its prior release in the process of implementing previously selected investment projects, investment goods or financial investment instruments.
Disinvestment represent the process of removing previously invested capital from investment turnover without its subsequent use for investment purposes (for example, to cover the losses of an enterprise). They can be characterized as negative investments of the enterprise.
13.By regional sources of capital attraction:
Domestic investments characterize investments of national capital (households, enterprises or government bodies) in a variety of investment objects by residents of a given country.
Foreign investment characterize capital investments by non-residents (legal entities or individuals) in investment objects (instruments) of a given country.
14.By regional focus of invested capital:
Investments in the domestic market characterize capital investments of both residents and non-residents in the territory of a given country.
Investments in the international market (international investments) characterize capital investments of residents of a given country outside its domestic market.
15.By industry focus of investment are divided into individual industries and areas of activity in accordance with their classifier. This form of investment classification is associated with state regulation of the investment process nationwide, as well as assessment of the investment attractiveness of individual industries (fields of activity) in the process of real and financial investment of an enterprise.
Economic essence, significance and goals of investment. Investment process.
Investments are cash, securities, other property, including property rights, other rights that have a monetary value, invested in objects of business and (or) other activities in order to make a profit and (or) achieve another useful effect.
The economic essence of investment in two aspects of capital movement:
1) investments are embodied in the created investment object of entrepreneurial activity, forming the investor’s assets;
2) with the help of investments, resources and funds are redistributed between those who have them in abundance and those who have them limited.
The importance of investment is a necessary condition and basis for:
1) balanced development of all sectors of the economy;
2) expansion of reproduction;
3) acceleration of scientific and technological progress;
4) ensuring the defense capability of the state;
5) development of financial markets, banking sector;
6) improving the quality of goods and services, ensuring their competitiveness;
7) protection of the natural environment, solving environmental problems;
8) increasing employment, reducing unemployment;
9) international cooperation;
10) development of the social sphere (education, healthcare, culture, etc.).
Investment goals can be:
1) the company’s desire to increase profits;
2) expanding the scope of the company’s activities;
3) the desire for prestige, social influence, power;
4) solving social problems (reducing unemployment, improving culture);
5) solving environmental problems, etc.
The investment process is a set of actions to attract savings of the population and legal entities for a certain time with the aim of using them through the formation of production fixed and working capital to obtain business profits. Two parties always participate in this process: the primary investor and the enterprise - a seeker of funds for its production development. As an economic category, the investment process expresses the relationships that arise between its participants regarding the formation and use of investment resources in order to expand and improve production. At the macro level, the investment process consists of the fact that the savings of the population, legal entities and part of state income not used for consumption are transformed into production equipment, buildings and structures, technology, materials and energy (investment goods), resulting in an expansion of production in scale of society. Increased production increases opportunities for savings, which are potential investments; savings, turning into investments, lead to expansion of production, etc.
The investment process is a dynamic process of transformation (change of forms)
capital:
Transformation of initial investment resources and values into investment costs (specific objects of investment activity - equipment, buildings, etc.) to create material prerequisites for commercial activity;
Transformation of invested funds into an increase in capital value in the form of income or social effect (accumulation of financial resources in the form of depreciation charges and part of the profit that pays back the capital invested in production).
According to the provisions of the theory of financial intermediation, the main owner of financial resources is the population, and the main consumer is enterprises and organizations. Households are not the only providers of funds in the financial market. Sources of investment capital can be the own resources of financial institutions, temporarily free funds of enterprises and organizations, funds of foreign investors, the state, etc.
functions of the investment process:
1. Study of the external investment environment: study of the legal conditions of investment activity; analysis of the current conditions of the investment market and the factors determining it; forecast of the current investment market conditions for individual segments related to the activities of the enterprise.
2. Development of strategic directions for the enterprise’s investment activities.
3. Development of a strategy for the formation of investment resources of an enterprise: forecasting the need for investment resources and determining the possibility of their formation from its own sources.
4. Assessing the investment attractiveness of individual investment projects and selecting the most impactful ones.
5. Current planning and operational management of the implementation of individual investment projects.
6. Organization of monitoring of the implementation of investment projects: formation of a system of observed indicators; determining the frequency of collecting and analyzing information; identifying the reasons for the deviation of the parameters for the implementation of investment projects from the calculated values.
7. Preparation of decisions on exit from investment projects and reinvestment of capital in the event of a decrease in the expected efficiency of projects or changes in the financial condition of the enterprise; investment market conditions and for other reasons.
As an economic category, investments perform the most important functions, without which normal, economically efficient development of the country is impossible. It is investments that largely shape the future of the country as a whole, its individual regions, and each economic entity - investments made today are the basis of tomorrow's well-being.
1. Concept, economic essence and types of investments
The term "investment" comes from the Latin word invest, which means "to invest." In a broad interpretation, investments can be defined as a long-term investment of capital with the aim of its subsequent increase, i.e. investment of economic resources with the aim of creating and receiving in the future net profit exceeding the total initial amount of investment (invested capital). In this case, the capital gain must be sufficient to compensate the investor for refusing to use available funds for consumption in the current period, reward him for the risk and compensate for losses from inflation in the coming period.
Depending on the goals set, the classification of investments can be carried out according to the following main characteristics.
1) Based on investment objects, the following three types of investments are distinguished:
· real investments (investments in physical assets);
· financial (portfolio) investments;
· investments in intangible assets.
Real investment is the investment of economic resources in tangible assets - in fixed capital and in the growth of material production inventories. Real investments, acting in the form of investment goods, can be movable and immovable property (buildings and structures, machinery and equipment, vehicles, etc.).
Investments in the creation (reproduction) of fixed assets (funds) are carried out in the form of capital investments.
In addition to investments that ensure the creation and reproduction of fixed assets, real investments are costs aimed at acquiring movable and immovable property, i.e. relating to physical (tangible) assets.
Financial (portfolio) investments are the investment of funds in various financial assets, mainly investments in equity (shares), debt (bonds) and other securities issued by companies, as well as the state; investments related to the use of primary and secondary financial instruments.
Investments in intangible assets are investments in training or advanced training of personnel, development of trademarks, acquisition of property rights arising from copyright; licenses, patents for inventions, certificates for industrial designs, rights to use trademarks, know-how, software products and other intellectual property. In addition, investments in intangible assets should include the acquisition of rights to use land, subsoil, other natural resources, as well as other property rights.
2) . According to the forms of ownership of the invested capital, private, state, foreign and joint investments are distinguished.
Private investments are investments made by citizens, most often the acquisition of shares, bonds and other securities, as well as investments made by privately owned enterprises and organizations.
Public investments are carried out by federal, regional and local authorities at the expense of budgets, extra-budgetary funds and borrowed funds, as well as by government agencies and enterprises at the expense of their own and borrowed funds.
Foreign investments are made by foreign citizens, legal entities and states.
Joint investments are investments made by entities of a given country and foreign entities.
3) Based on the duration of capital investment, short-term (up to one year), medium-term (from one to three years) and long-term (more than three years) investments are distinguished.
4) According to the degree of investment risk, investments can be classified into low-risk, medium-risk and high-risk investments.
5) In relation to the life cycle of an enterprise, real investments can be divided into initial, extensive investments and reinvestments.
Initial investments - investments in the creation of an enterprise, firm, service facility, etc.; The funds invested by investors are used for the construction or purchase of real estate (buildings, structures, land), for the purchase and installation of equipment, and the formation of working capital.
Extensive investments are aimed at expanding existing enterprises, increasing their production potential, including expanding the scope of activities.
Reinvestment is associated with the process of reproduction of fixed assets at existing enterprises at the expense of their available funds (consisting of depreciation charges and part of the profit directed to the development of production).
6) Based on the purpose of the investment, real investments can be summarized into the following main groups:
· investments intended to improve production efficiency; their goal is to create conditions for increasing the efficiency of an existing enterprise, reducing production costs by replacing equipment with more productive ones or moving production facilities to regions of the country with more favorable production conditions;
· investments in expansion, diversification of production - to expand the volume of products for already developed sales markets within the framework of existing production facilities, to expand the scope of services provided;
· investments that ensure the survival of the enterprise, this includes costs for research and development work, advertising, marketing, training and (or) retraining of personnel, including for new technologies;
· investments ensuring the fulfillment of government or other large orders;
· investments related to meeting legal requirements.
7) Based on the nature of investors’ participation in investment projects, a distinction is made between direct and indirect (indirect) investments.
Direct investment implies the direct participation of the investor in the investment process - the investor himself determines the investment object, as well as the organization of financing of the investment project. Sources of financing in this case can be either the investor’s own funds or borrowed funds.
Indirect (indirect) investments - investments of funds by investors, individuals or legal entities in securities issued by financial intermediaries who place the funds invested by investors in the implementation of investment projects at their own discretion, based on forecasts of the profitability of a particular investment project.
2. Value of investment
As an economic category, investments perform the most important functions, without which normal, economically efficient development of the country is impossible. It is investments that largely shape the future of the country as a whole, its individual regions, and each economic entity - investments made today are the basis of tomorrow's well-being. In turn, the current economic state is largely predetermined by past investments. The significance of investments lies in the fact that the implementation of their functions is a necessary condition and basis for the following:
· structural restructuring of social production, balanced development of all sectors of the economy;
· expanded reproduction;
· acceleration of scientific and technological progress;
· ensuring the defense capability of the state;
· development of financial markets, banking sector;
· improving the quality of goods and services, ensuring their competitiveness;
· protection of the natural environment, solving environmental problems;
· increase in employment, decrease in unemployment;
· international cooperation;
· development of the social sphere.
3. Investment process. Stages and phases of the investment process
The investment process is a sequence of stages, actions, procedures and operations for the implementation of investment activities. The specific course of the investment process is determined by the object of investment and the types of investment (real or financial investments).
It is extremely important to understand that since the investment process and investing are associated with long-term investments of economic resources in order to create and obtain benefits in the future, the main aspect, the essence of these investments lies in the transformation of the investor’s own and borrowed funds into assets that, when used, will create new value .
There are three stages as the main stages of the investment process.
At the first (preparatory) stage, decisions are made on investment within the framework of its first phase, and investment goals are formed. In the second phase, the direction of investment is determined. In the third phase, specific objects for investment are selected, an investment agreement is prepared and concluded. By signing an investment agreement, the invested material and intangible benefits are given the status of investments.
The second stage of the investment process is the implementation of investments, practical actions for the implementation of investments, put into legal form by concluding various agreements. They may be contracts related to the transfer of property; contracts aimed at performing work or providing services, licensing and other civil law contracts. The second stage ends with the creation of an investment activity object.
The third (operational) stage is the stage associated with the operation of the created object of investment activity. Within the framework of this stage, the production of goods, performance of work, and provision of services is organized; a marketing and sales system for a new product is created. During the operational stage, investment costs are compensated and income from the sale of investments is generated. This stage coincides with the payback period of the investment.
4. Goals and directions of investment
The development of areas of investment activity is associated with determining both the ratio of various forms of investment at specific stages, and the direction of investment activity, including its industry component.
Among the external factors influencing the choice of investment forms, the most significant are the following two factors: inflation and interest rates in the financial market.
Investment goals can be:
· the company's desire to increase profits;
· expanding the scope of the company's activities;
· desire for prestige, social influence, power;
· solving social problems, such as maintaining and increasing jobs, reducing unemployment, increasing the cultural and educational level of people;
· solving environmental problems, etc.
Often, investment goals are formulated vaguely, vaguely, and in general categories. There is no coordination of individual goals, plans to achieve them are not coordinated, and the possibility of implementation is not justified. For these reasons, it is important to form real specific goals based on formal goals with the definition of target indicators. For example, a formal goal - expansion of production - must be specified in the form of indicators by which it is possible to determine the degree of achievement of the goal. These indicators may be indicators of the average profit for a certain period, or the volume of products produced (services provided) in physical and monetary terms, or other indicators characterizing the expansion of production as a result of investment.
Clearly and correctly formed and formulated investment goals simplify the solution of problems associated with the choice of investment directions and increase the efficiency of their achievement. Among the areas of investment there may be interdependent investments, investments independent of each other, as well as mutually exclusive (alternative) investments.
Conclusions
Investment can be defined as a long-term investment of capital with the aim of subsequently increasing it, i.e. investment of economic resources with the aim of creating and receiving in the future a net profit exceeding the total initial investment. In this case, the capital gain must be sufficient to compensate the investor for refusing to use available funds for consumption in the current period, reward him for the risk and compensate for losses from inflation in the coming period.
The investment process is a sequence of stages, actions, procedures and operations for the implementation of investment activities. Specific investment flow.
It is extremely important to understand that since the investment process and investing are associated with long-term investments of economic resources in order to create and obtain benefits in the future, the main aspect, the essence of these investments lies in the transformation of the investor’s own and borrowed funds into assets that, when used, will create new value .
The priorities of certain forms of investment are determined by both internal and external factors. The most important internal factor is functional orientation, i.e. main activity of the investing company. Other internal factors are: the strategic direction of operating activities, the size of the enterprise, the stage of its life cycle. Large enterprises and organizations in the real sector of the economy, as well as those at the “maturity” stage, are characterized by an increase in financial investment. For enterprises at earlier stages of development, the predominant form of investment is investment in tangible and intangible assets.
List of sources used
1. Bocharov V.V. Investments. – St. Petersburg: Peter, 2009. – 384 p.
2. Chinenova M.V. Investments. - M.: KNORUS, 2007. – 248 p.
3. Tkachenko I. Yu. Investments. – M.: IC “Academy”, 2009. – 240 p.
4. Kovaleva V.V. Investments. – M.: Prospekt, 2004. – 440 p.
5. Bocharov V.V. Investment management. – St. Petersburg: Peter, 2000. – 160 p.
6. Neshitoy A.S. Investments. – M.: Dashkov and K, 2007. – 372 p.
7. Vakhrin P.I. Investments. – M.: Dashkov and K, 2005. – 380 p.
Tutoring
Need help studying a topic?
Our specialists will advise or provide tutoring services on topics that interest you.
Submit your application indicating the topic right now to find out about the possibility of obtaining a consultation.
Investment process is the initial stage - the creation stage - in the life cycle of fixed assets and at the same time itself represents a sequence of several production processes, as a result of which the final investment product is created. They can be divided into three stages: design (creation of design and technological documentation for the construction or reconstruction of a facility), construction (performing construction and installation work at the facility) and development (achieving design capacities or design parameters in the operation of the facility).
At the end of the life cycle of fixed assets that have significant physical and moral (functional) wear and tear, the object is liquidated. If technically possible and cost effective renovation(renewal) of an object through its reconstruction, modernization or technical re-equipment, then at this stage capital-forming investments are also carried out, and, consequently, the investment process.
INVESTMENT PROCESS – This is the process of making capital-forming investments in the construction of new or reconstruction and modernization of existing production and non-production facilities.
Like any process, the investment process is characterized by certain parameters. The main parameters of the investment process are:
Duration of the investment cycle;
Capital intensity of investment products;
Investment structure.
Financial institution- financial intermediary: - between lenders and borrowers; or - between investors and savers: pension funds, insurance companies, etc. Financial institutions provide money transfer and lending services and influence the functioning of the real economy by acting as intermediaries in the process of converting savings and other funds into investments.
The economic essence of investments is expressed in two aspects of the movement of capital: 1. investments are embodied in the created investment object of entrepreneurial activity, forming the investor’s assets; 2. with the help of investments, resources and funds are redistributed between those who have them in abundance and those who have them limited. The importance of investments lies in the fact that they are a necessary condition and basis for: 1. balanced development of all sectors of the economy; 2. expansion of reproduction; 3. acceleration of scientific and technological progress; 4. ensuring the defense capability of the state; 5. development of financial markets, banking sector; 6. improving the quality of goods and services, ensuring their competitiveness; 7. protection of the natural environment, solving environmental problems; 8. increasing employment, reducing unemployment; 9. international cooperation; 10. development of the social sphere (education, healthcare, culture, sports, housing construction, social security, etc.). Investment goals can be: 1. the company’s desire to increase profits; 2. expanding the scope of the company’s activities; 3. desire for prestige, social influence, power; 4. solving social problems, for example maintaining and increasing jobs, reducing unemployment, increasing the cultural and educational level of people; 5. solving environmental problems, etc.
6 Criteria and methods for evaluating investment projects .
The process of making management decisions of an investment nature is based on the assessment and comparison of the volume of proposed investments and future cash receipts. The general logic of analysis using formalized criteria is, in principle, quite obvious - it is necessary to compare the amount of required investment with projected income. The criteria used in the analysis of investment activity can be divided into two groups depending on whether the time parameter is taken into account or not: a) based on discounted estimates; b) based on accounting estimates. The first group includes the following criteria: net present value (NPV); profitability index (PI); internal rate of return (Internal Rate of Return, IRR); modified internal rate of return (Modified Internal Rate of Return); discounted payback period (DPP). The second group includes criteria: investment payback period (Payback Period, PP); investment efficiency ratio (Accounting Rate of Return, ARR). Let's consider the key ideas underlying the methods for evaluating investment projects using these criteria.
Method for calculating the net present effect . This method is based on comparing the value of the initial investment ( IC) with the total discounted net cash flows it generates over the forecast period. Since the cash inflow is distributed over time, it is discounted using a factor r set by the analyst (investor) independently, based on the annual percentage return that he wants or can have on the capital he invests. Suppose a forecast is made that the investment ( IC) will generate within n years annual income in the amount of R 1 , R 2 , ..., R n. The total accumulated value of discounted income ( PV) and net reduced effect ( NPV) are respectively calculated using the formulas:
PV = ∑(P k / (1+r) k ) (4.1)
NPV = ∑(P k / (1+r) k ) - IC (4.2)
Obviously, if:
NPV>0, then the project should be accepted;
NPV<0
NPV = 0
If the project does not involve a one-time investment, but sequential investment of financial resources over m years, then the formula for calculating NPV modified as follows:
NPV = ∑(P k / (1+r) k ) - ∑ (IC j / (1+i) j ) , (4.3)
Where i- projected average inflation rate ( k=1,..., n; j=1,..., m).
Method for calculating the return on investment index . This method is essentially a consequence of the previous one. Profitability index ( P.I.) is calculated using the formula
PI = ∑(P k / (1+r) k )/IC (4.4)
Obviously, if
PI>1, then the project should be accepted;
P.I.<1 , then the project should be rejected;
PI=1, then the project is neither profitable nor unprofitable.
In contrast to the net present effect, the profitability index is a relative indicator: it characterizes the level of income per unit of cost, i.e. investment efficiency - the higher the value of this indicator, the higher the return on each ruble invested in a given project. Thanks to this criterion P.I. very convenient when choosing one project from a number of alternative ones that have approximately the same values NPV(in particular, if two projects have the same NPV values, but different volumes of required investments, then it is obvious that the one that provides greater investment efficiency is more profitable), or when completing a portfolio of investments in order to maximize the total value NPV.
Method for calculating the internal rate of return of an investment . Under the internal rate of return of an investment ( IRR- synonyms: internal profitability, internal payback) understand the meaning of the discount factor r, at which NPV project is 0:
IRR = r, at which NPV = f(r) = 0
In other words, if we denote IC = C fo, That IRR is found from the equation:
∑ (CF k / (1 + IRR) k ) = 0, Where k=0,..., n. (4.5)
Method for determining the payback period of an investment . This method, which is one of the simplest and most widespread in global accounting and analytical practice, does not imply a temporal ordering of cash receipts. Algorithm for calculating the payback period ( RR) depends on the uniform distribution of projected income from the investment. If income is distributed evenly over the years, then the payback period is calculated by dividing one-time costs by the amount of annual income due to them. When a fraction is obtained, it is rounded up to the nearest whole number. If the profit is distributed unevenly, then the payback period is calculated by directly calculating the number of years during which the investment will be repaid by cumulative income. The general formula for calculating the PP indicator is:
PP = min n, at which ∑ Pk >=IC, Where k=1,...,n. (4.6)
Method for calculating the investment efficiency ratio . This method has two characteristic features: firstly, it does not involve discounting income indicators; secondly, income is characterized by a net profit indicator PN(profit minus contributions to the budget). The calculation algorithm is extremely simple, which predetermines the widespread use of this indicator in practice: the investment efficiency ratio, also called the accounting rate of return ( ARR), calculated by dividing the average annual profit PN by the average investment amount (the coefficient is taken as a percentage). The average investment value is found by dividing the initial amount of capital investment by two, if it is assumed that upon expiration of the implementation period of the analyzed project, all capital costs will be written off; if the presence of residual or liquidation value is allowed ( RV), then its assessment should be taken into account in the calculations. In other words, there are various algorithms for calculating the indicator ARR, quite common is the following:
ARR = PN / (0.5×(IC+RV)) (4.7).