Effective method development and promotion of a company is the investment of values ​​in it. This contributes to the development of large organizations and reduces the risk of bankruptcy. Mid-level enterprises have the opportunity to grow and form corporations.

Investments

To increase the profitability of a company, its manager must properly manage investment resources. Net and gross investments influence the development of a private or public business entity, and also ensure their normal functioning. They are aimed at stabilizing the organization’s resources and increasing them.

What types of deposits are there?

By classifying investments according to the method of accounting for funds, they can be divided into net and gross.

Net investments represent cash flows aimed at increasing the company's capital, participating in ensuring the normal functioning economic system and improving the standard of living of project participants. Gross investments include investments in fixed assets. They consist of paid construction services, the object of which is production facilities, the costs of purchasing new or additional equipment, as well as the costs of modernizing it. They reflect the totality of net investments and depreciation charges, which cover the depreciation of fixed capital and its restoration to its original state. Net investments are a component of gross financing, so the parameters are difficult to identify by one type.

Objects of gross investment

Types of investments

One of the elements of gross investment is fixed capital. It contains funds for the restoration of its used part in the form of moral and physical wear and tear. At its expense, work is being carried out to modernize and reconstruct technological lines, as well as to update equipment and change technology to modern methods that ensure high performance indicators.

Working capital, presented in the form of stocks of raw materials, materials and finished products, is not included in gross investment in full. Since the calculation of the value takes into account only changes in parameters over a selected time period, with a general increase in gross investment, contributions to working capital can be expressed as a negative number.

The inclusion of intangible assets in investments can be identified as the right to property or ownership in relation to real estate. Trademarks, brands, licenses, inventions, patents and software products are also constituent elements of the parameter.

Gross investments include contributions to improving human potential and ensuring a decent level of social sphere parameters. Improving the qualifications of workers, improving their living conditions, paying for the education of the children of the organization’s employees imply an increase in the profitability of production. This is due to the high qualifications of employees and their rapid restoration of physical and moral strength, due to the creation of normal living conditions.

Structure of gross investment

The indicator identifying the state of gross investment is taken into account in the system of economic criteria of an individual enterprise and is used in calculations when compiling statistical reporting. It is part of the system of parameters of national public accounts and helps to assess macroeconomic indicators.

Gross Investment- this is the total volume of investment resources in all their forms, aimed in a certain period at the implementation of real and financial investment.

Gross Investment Formula

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The goal of a commercial enterprise is to obtain and increase profits, which can be achieved by increasing prices or output volumes.

It is possible to increase production volume by intensifying the production process, but this will inevitably lead to rapid wear and tear of the equipment used. To expand its production activities, the company will have to find funds to purchase new modern equipment.

In economics, a distinction is made between the concepts of “gross” and “net” investments. Gross investment is financial resources which are used to increase and replace the fixed capital of an enterprise. Depreciation deductions are used for reimbursement, and an increase in fixed capital is achieved through the use of. It follows from this that the value of net investment can be determined by the formula:

NI = TI – A,
where NI – net investment, TI - gross investment, A - the amount of depreciation charges for a certain period.

If NI is 0, then production potential increases and economic growth occurs.

Factors that influence the amount of net investment

Investment activity can be considered at the macro level (at the level of the state economy) and at the micro level (at the level of the economy of a particular enterprise).
The following macroeconomic factors may affect the amount of net investment in a merger:
1. stability of the economic and political system;
2. level of technology development;
3. level of development of the legislative framework;
4. .
Macroeconomic factors affect all enterprises operating in a particular state.
In addition, the following additional factors influence the amount of investment:
- expected return on investment:
- the level of inflation in the economy.
An individual investor, when deciding to invest in a company, evaluates the likely rate of return or expected return on investment. In addition, a competent investor will definitely analyze several alternative options investments. For example, you can spend cash to open a new production or expand an existing one, or you can place the same funds in a deposit account. If bank interest turns out to be higher than the expected return on investment, then it will not be profitable for the investor to invest in the enterprise.
Inflation also significantly affects the amount of investment. Inflation eats up profits, so nominal income will be different from the real one. Realize investment activity will be profitable only if the rate of return exceeds the rate of inflation.

Investment can be defined as one of the types of economic activity of individuals and legal entities. The activity involves investing your own material assets(capital, securities) into any object or phenomenon that has a monetary value. Funds are invested with the expectation that the value of the purchased asset will grow over the years, which will bring passive income to the investor.

Depending on the object of investment, investments are usually classified into:

• real (actual acquisition of material assets);
• financial (purchase valuable papers);
• speculative (purchase of currency, commodity raw materials or securities with the expectation of a sharp increase in the asset and subsequent sale at a new market value).

Investment activities are also classified depending on the purpose of the deposits:

• direct (acquisition of company assets with the aim of taking part in its development);
• portfolio (purchase of shares of several large companies in order to obtain stable passive income);
• real (investment in production or industrial activities);
• non-financial (information contributions to the development of the company, which can be expressed in the form of scientific developments or discoveries);
• intellectual (financing the creation of intellectual products on individual terms).

According to accounting, investments are usually divided into gross and net.

Gross and net investment: concepts and meanings

Net investment is usually called the actual increase in the real capital of an enterprise from third-party sources. The difficulty of calculating such investments, compared with calculating gross investments, is primarily due to the depreciation of capital (loss of the market value of tangible assets under the influence of inflation and other macroeconomic and geopolitical factors).

The role of net investment

To ensure the stable development of almost any enterprise, constant investments are required in modernizing production, increasing commodity turnover, etc. To understand the meaning of net investment, you need to consider the following example: the founders of an enterprise set the goal of modernizing the production base. For this they need funds. The board of directors decides on the issue of shares, which go to trading platforms for implementation. Buyers of such assets can expect to receive dividends, the amount of which will depend on the demand for the company's products and the volume of sales of finished goods. The founders can spend the proceeds in this way on the needs of the organization. Such proceeds constitute a net investment from individuals only after the completion of trading. Both individuals and investors can act as private investors. legal entities (commercial banks And investment companies). As a result of such manipulations, the founders will not have to specifically find investors.

Also, net investments are the personal material contributions of the founders to the development of the company.

Gross Investment

Gross investments are usually understood as investments by a private person in the development of commercial organization. Essentially they refer to real investments aimed at increasing fixed capital or working capital. Financial investments are considered gross if an individual a purchase was made of the company's securities, which were issued for the purpose of attracting third-party capital.

Depending on the size authorized capital enterprises, gross investments are classified into 2 groups:

• depreciation (restoration of the original volume of trade turnover);
• investing (increasing capital).

Gross investment is considered as such only if it led to an increase in the initial investment. IN otherwise- This is a pure investment.

Calculation formula

The volume of gross investment (B) can be calculated using the formula. To do this, you need to display the sum of depreciation (A) and net deposits (H): B=A+H. This formula is widely used in macroeconomics. Good example- determination of the state’s GDP based on expenditures. At the same time, the gross investment indicator is one of the components, along with the volume of production costs and export costs.

The formula for net investment determines its volume: H=B-A.

For the development of the economy of a state or an individual enterprise, the predominance of gross investments over the amount of depreciation is important. With identical values, stagnation occurs, since restoration of capital using only internal resources is practically impossible.

Composition of gross investments

As a rule, the composition of gross investments depends on the investment object. They may be:

• human resources;
• intangible assets;
• funds aimed at ensuring trade turnover;
• fixed capital of the enterprise.

Gross investments are aimed at developing fixed capital. Therefore, they are used to implement the following tasks:

• depreciation of capital wear and tear (physical and moral);
• modernization of production and introduction of innovative technologies;
• construction and so on.

The structure of gross investments also includes investments in intangible assets:

• brands and trademarks;
• additional software;
• licensing of certain types of activities;
• acquisition of rights to land, deposits and buildings for both residential and commercial purposes;
• investment in product creation intellectual property(innovations, scientific developments and others).

Practice shows that it is expedient and cost-effective to use gross investments for the development of human resources. Thanks to this, you can achieve greater productivity:

better quality of productivity of a qualified workforce and the organization of comfortable working conditions contribute to less fatigue of employees and faster recovery.

Source of net investment

Sources of net investment are usually divided into external and internal. In turn, internal ones include:

• profit;
• planned deductions for depreciation;
• profit received from the sale of unnecessary property of a business.

External sources of net investment include:

• bank loans;
• investments from private investors;
• profit received as a result of the issue and sale of securities;
• attracting capital from foreign investors.

Depending on the application, private investments provide different economic benefits. They are usually divided into real and monetary. The former are aimed at developing production and increasing the number of jobs, while the latter are aimed at manipulating securities.

Efficiency of use

The efficiency of using investments is determined depending on their structure. Excessive financial investments lead to rapid growth of inflation. If additional funds not enough, it could lead to deflation. These extremes need to be managed through an effective tax strategy, credit policy, expenses and other material and budgetary activities.

Investments are the first stage in the formation of a commercial organization. Thanks to investments, a material base is created for the further development of the enterprise. At the level of private business, net and gross investments provide an increase in turnover and productivity in general, which in turn leads to an increase in the profit of the enterprise. Also, attracting third-party investment allows you to increase reserve and fixed assets.

The indicator of net and gross investment at the state level allows us to draw a conclusion about the demand for goods and services produced in the country, as well as the level of GDP, and determine the attractiveness for attracting foreign investment and assess the level of economic development of the state as a whole. The lack of gross investment will lead to a lack of development of education, high technology, scientific research and healthcare systems.

There are 3 ways to measure GNP (GDP):

1. By cost (end-use method).

2. By value added (production method).

3. By income (distribution method).

When calculating GNP by expenses the expenses of all economic agents using GNP (households, firms, government and foreigners) are summed up. In fact, we are talking about the aggregate demand for produced GNP.

Total expenses can be broken down into several components:

GNP =Y=C+I+G+NX,

where C is personal consumer expenditures, which include household expenditures on durable goods and current consumption, on services (except for expenditures on the purchase of housing).

I – gross private domestic investment. Includes productive capital investments (investments in basic production assets), investments in housing construction and investments in inventories (materials and materials).

Investment is understood as an addition to the physical stock of capital. Acquisition financial papers(stocks, bonds) is not an investment. The term “domestic investment” means that it is investment made by residents of a given country (including spending on imported goods). The term private investment means that it does not include public investment. The term "gross" means that depreciation is not deducted from the investment:

Gross Investment = Net Investment + Depreciation.

An increase in inventories is taken into account with a “+” sign, and a decrease with a minus sign.

G – government purchases of goods and services (construction and maintenance of schools, roads, army, national defense expenditures, salaries of civil servants, etc.). This does not include transfer payments. Government transfers are payments not related to the movement of goods and services. They redistribute state income through benefits, pensions, and social insurance payments.

NX is a pure export. It is equal to the difference between the value volumes of exports and imports. If a country exports more than it imports, then it acts as a “net exporter” on the world market, and GNP exceeds domestic spending. If it imports more, then it is a “net importer”; the value of net exports is negative. The amount of expenses exceeds the volume of production.

This GNP equation is called the basic macroeconomic identity or national accounts identity.

When calculating GNP production method the value added at each stage of production of the final product is summed up.

Value added (VA) is the difference between the cost of products produced by the firm andthe cost of intermediate products purchased by the company.

The value of GNP in this case is the sum of the added value of all producing firms. This method allows us to take into account the contribution of various firms and industries to the creation of GNP.

GNP = Σ Value added + Indirect taxes – Government subsidies.

For the economy as a whole, the sum of the entire VA must be equal to the cost of final goods and services.

When calculating GNP by income all types of factor income are summed up (salary, rent, %), as well as 2 components that are not income: depreciation charges and net indirect taxes for business (taxes minus subsidies).

There is a relationship between GNP and GDP indicators:

GNP = GDP + net factor income from abroad.

Net factor income from abroad is the difference between the income received by citizens of a given country abroad and the income of foreigners received in the territory of a given country.

If GNP exceeds GDP, it means that residents of a given country earn more abroad than foreigners earn in that country.

According to the method of receiving income, GNP is divided into: the following types factor income:

§ compensation for labor of employees (salary, bonuses);

§ income of owners;

§ rental income;

§ corporate profits (remaining after wages and interest on loans; it includes shareholder dividends, retained earnings and income tax);

§ net% (the difference between interest payments by firms to other sectors of the economy and interest payments received by firms from other sectors - households and the state).

Of the three methods, the production method and the end-use method are the most commonly used.