Evgeny Smirnov
BSADSENSEDINAMICK.
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In detail about gross and net investments
Definition of terms gross and net investments, calculation formula and detailed analysis.
Navigation by article
- Gross investment, which is included in their composition
- Private and public investment
- Clean investments
- Types of investment solutions
- Difficulties in making investment solutions
Investment sphere B. existing companies Encompasses such types of investments such as gross and net investments. Understanding the difference between them is important for the proper management of the enterprise, as well as for analyzing common macroeconomic trends on a state-accounting.
In order to eliminate possible misunderstandings, let's figure it out in the fact that gross and net investments are represented than they differ and what is the relationship between them.
Gross investment, which is included in their composition
Under gross investments it is customary to understand the amount of all deductions for depreciation of fixed assets plus net investments that are sent to an increase in these funds. In this way, gross investmentsThe component of GDP is equal to the sum of the two main parts:
- Depreciation costs. Present a financial resource used to compensate for the repair and restoration of fixed assets worn in the process of economic activity.
- Net investment. These are new additional investments made in order to increase the main funds (building new buildings, the purchase of a new production equipment etc.).
The implementation of permanent and regular investments is of great importance for the company's activities. Thanks to investments, a normal staff functioning of a production or commercial complex is ensured. They also allow increasing profits from the object activity due to an increase in scale or reduce costs.
At the macro level, gross investments are necessarily taken into account when calculating the indicators of the state economy, including to calculate the dynamics of GDP. Formula for the calculation of gross investment:
B \u003d a / h
Where:
V - gross investment;
A - depreciation amount;
H - net investment.
Private and public investment
As a rule, when it comes to gross investments, attachments are implied in manufacturing enterprises and trading platforms, as well as in the enterprises of the service sector. That is, in the commercial sector in order to receive profits in the future.
However, at the macro level (from the point of view of the state), gross investments are also investments of public and private money in the sports and cultural sector, social sphere, health care system, etc. But in this case, the ultimate goal of the investor will not receive financial benefits, but an intangible result is an increase in culture, level of education, improved public health.
One of the central characteristics of the investment is their effectiveness (profitability), which depends on the structure of investments. The structure of investments is the composition of investments by types and directions. The investor has to determine what direction is prioritizing and more profitable. For example, investments in the repair of the production workshop or the purchase of new equipment, in the expansion of production or its upgrade.
Non-state investment in the overwhelming majority is invested in the commercial sector with rapidly turning and high profitability. This leads to the industry with long turnover or low profits remain without private investment. Then the state invests in them if he considers them important and significant.
At the macro level, the economy is growing if gross investment exceeds depreciation costs. At the same time, excessive investment provokes inflation processes in the economy, and the lack of investment is able to cause a reverse process - deflation and even recession. Both effects are equally undesirable, so the role of the state is to properly adjust the investment climate in the country, not allowing an excess and shortage of gross investment.
On the micro-level, that is, at the level of enterprises, there is no such problem in its pure form. But too large investments may result in the problem of their rational use. On the other hand, the lack of gross investment, primarily their depreciation part, will inevitably lead to problems with the resumption of fixed assets. As a result, it may be difficult to implement economic activities.
Clean investments
Under clean investment it should be understood long-term investmentsaimed at the development, modernization and expansion of the enterprise. In other words, net investments are gross investment minus funds directed to the repair and restoration of fixed assets. While depreciation costs are carried out in order to keep the enterprise at the current level of productivity, net investments are designed to expand its scale of activity and thus bring additional income in perspective.
By and large, the task of any entrepreneur is the permanent implementation of net investments (including their attraction from the part) and the increase in the absolute values \u200b\u200bof the obtained net profit. The same principle is also valid at the macro level, because the sum of all net investments in many enterprises in the country leads to an increase in GDP and an increase in the well-being of citizens and the state.
When implementing net investments, the issue of efficiency and priority is becoming more acute. For the owners of the enterprise, it is limited, at least, its own business, so they choose between different directions of its expansion. But for independent investors, a truly unlimited field of opportunities and investment options, including in purely speculative assets, and not to the production funds of specific enterprises are opened.
To accept managerial decisions when choosing investment projects Many different factors affect:
- available for investment projects;
- the cost of the minimum investment package;
- profitability of available projects;
- the risks with which investments in these projects are conjugated.
Types of investment solutions
As we have already found out, gross investments minus depreciation - this is the net investment. In the implementation of net investments in a separate enterprise, there are several directions in which progress can be achieved by cash infusion. These directions are classified as follows:
- Mandatory investments, without which the enterprise will not be able to carry out its activities in connection with government restrictions, rules and norms that need to be configured. For example, the introduction of technological and organizational decisions aimed at reducing environmental damage; Improving working conditions for staff to state standards.
- Investments in the modernization of the enterprise and a decrease in production costs. In particular, the purchase of new, more economical and productive equipment, general technical upgrades; Mastering alternative, more progressive technological processes and techniques; Structural reorganization of the enterprise in order to optimize the management of technological processes.
- Investments in the expansion of the enterprise, including the development of new products or services. It may be the construction or purchase of new real estate, which will be needed when expanding production; Or buying a new additional equipment that will be used along with the already available. Also here applies to hiring and training additional personnel; Creation of a new subsidiary in a new territory with its own production cycle.
- Investments in the acquisition of financial assets in order to improve market conjuncture. Expenditures on the formation of a strategic partnership (alliance) with an adjacent enterprise to create a more complete production cycle and optimizing costs. The absorption of competing companies or enterprises with the necessary technologies or assets, as well as other solutions for manipulation of fixed assets.
- Investments in the development of new markets. For example, the cost of creating new territorial branches, or the cost of conquering a new audience on the old territory.
- Investments in the purchase of important intangible assets - copyright and licenses for the use of someone else's intellectual property.
Difficulties in making investment solutions
When carrying out gross investments, various difficulties can arise with the definition of the most priority directions for investment. The easiest thing is the case with depreciation expenses, since the management of the enterprise has a very clear idea that it is necessary to purchase and repair, as well as what volume of investments will be required for this.
It is much more difficult about the situation with net investments, with the exception of the obligatory. When expanding and modernizing the enterprise, it is not always easy to determine even the overall strategy and the direction in which you need to move, not to mention the specific costs of expenses that will have to finance.
Often the determining factor that allows you to choose a direction for investment is the amount of means available to invest. Obviously, if there is small sum You can only upgrade part of the equipment, and if a lot of money is available, you can put on to buy a competitor's company or conquering a new market.
Than more sum investment, the more often analysts are involved in the careful study of all economic and organizational aspects Project. This allows you to determine the most rational and favorable way project implementation and, accordingly, get more profit in the end.
In large organizational complex enterprises, it is often a differentiation of the right to make investment solutions for leaders of different levels. Often, depreciation costs are completely given to the deposit of lower and middle managers, while the strategic solutions for pure investments remain behind the top management. Also, the distribution of these rights is largely affected by the amount of the amount of investment. As a result, for example, the purchase of a new office printer for $ 300 is under the jurisdiction of the first level, and the purchase of a new office building for $ 3 million is carried out only by decision of the general director.
Any economic entity involved in commercial activityThe income or other benefits is always aimed at increasing the volume of benefits received by him. In other words, the development and expansion of their own business and ideas, thanks to which he receives income.
They are an additional directed and serving of the development goals and increasing production, which leads to an increase in the level of recoverable profits.
The expansion of any production is inextricably linked with increasing profitability. of this production. In other words, the more the amount of capital of the company, the greater the means and prerequisites for its further development.
In essence, clean investments Always aimed at modernization, improving and improving the quality of products or services, which leads to an increase in its price and a general increase in the company's profitability.
Pure investment is Amount less depreciation deductions per reporting period.
The volume of net investments and their speake characterizes the economic state of the company. An indicator of net investments is directly proportional to the efficiency of the enterprise. If the indicator takes positive value, this suggests that the organization in this time period feels good and is on an economic rise and there are all prerequisites for further development. In case the indicator is in a negative value, this reflects the current economic downturn. If the indicator is zero, it can be safely argued that the company is in the stagnation stage.
What is pure investment
The main capital of the enterprise is all the property of the organization expressed in the monetary equivalent. Everyone is well known that material objects Such as equipment, real estate, transport, tools and other, has the property to wear and flies. Only possible variant Further production is their replacement, repair or upgrades.
Funds spent on updating the fundamental capital of the organization are clean investments.
The facility of the company is both fixed assets of the enterprise, and its intangible assets.
Based on the foregoing, it can be concluded about the direction of investment investment:
- repair, maintenance, replacement and modernization of worn production capacity to maintain current production volumes
- purchase of new equipment, tools, transportation, construction of new properties to expand the organization.
Pure investment formula
Allocate the two most common formulas for pure investments.
Chi \u003d W - JSC
Where, chi - net investment
V - Gross Investments
And -amortional deductions.
Another type of clean investment formula looks like
Clean \u003d net investment in fixed capital + net investments in housing construction + Investments in stocks.
Each enterprise has its own production cycle and the amount of funds sent to maintain the current level of manufactured products, as well as the future development of the organization.
This is the sum of all spent resources for building funds necessary in the production, raw materials and materials, investments aimed at the construction of new real estate objects, an increase in stocks of both commodity and material in the reporting period.
The most acute problem is the correct evaluation of efficiency. gross investments, that is, the compulsion of investment in the economic and industrial activity of the enterprise with the final result of them. A prospective result is considered to be a profit exceeding the investment costs for its achievement.
Also in volume gross investments It is possible to give some assessment of the economic condition of the specific economic Subject. When the volume of gross exceeds the size of the depreciation at the enterprise, this suggests that the economic condition of the organization is close to healthy, and the company is experiencing an economic rise. This is due to the growth of industrial potential.
If gross investments Equal by depreciation deductions takes place to be ordinary reproduction of products not characterized by economic growth.
The economic downturn occurs at a time when depreciation exceeds the volume of the treated gross investment and the lack of production potential is manifested. In other words, when they take negative values.
It is worth understanding that this indicator is able to reflect the state of affairs in the economy both from the statistical side and the actual one. And thanks to him, it is possible to carry out an analogy and predict the further path of the economic development of the organization, a private person or the economy of the country as a whole.
Gross investment formula
As gross investments In essence, they are a totality of all investments or rehabilitation investments (depreciation) + investments aimed at expanding and developing a specific economic entity. Based on this, the shaft investment formula is as follows.
Gross investments \u003d depreciation + net investments.
The effective functioning of any enterprise depends on the proper investment policy of the management. When developing a faithful course, it is important to confidently operate with the concepts of gross and net investments, understand how they affect the organization's condition and the level of confidence.
In the article, we will look at what gross and net investments are that their differences are from which sources they are formed and what needs, as well as find out what the signals are indicated. calculated values These indicators.
The concept of investment
Before talking about such concepts as gross and net investments, it should be determined with the concept of "investment". So, investments are monetary or material investments in order to obtain profits or other benefits. Investment objects can act as production and in the face of health, education, culture organizations.
The role of investment
IN modern economy It is difficult to overestimate. They affect all spheres of society through regulation and redistribution of goods. Consider a simple example: financial investments The manufacturing company allowed to open a new shop. In order to build it and pave the infrastructure, attracted construction organizationsWhat made it possible to earn. The new workshop needs workers, so the number of jobs increased, the unemployment rate in the country has decreased and the well-being of the population has increased. Due to the opening of the workshop, the production volume has increased, therefore, the profit of the business entity has increased.
Workers of the new workshop have the opportunity to spend earned money on education, culture or invested them in real estate. This example is quite conditional, but clearly reflects the value of investment activities for the country's economy as a whole. Of course, the effectiveness of investment in the production sphere is much easier to evaluate, so we will further consider investments in the microeconomic sense, that is, from the point of view of a separate manufacturing enterprise.
Structure of investment
It is customary to distinguish real and financial investments. Financial investments include the acquisition valuable papersissued by a state or other business entity. TO real investment include investments in major and working capital, new construction, repair production Funds, acquisition of real estate and land plots, as well as investments in intangible assets: licenses, patents, research, advanced training of employees. Thus, we smoothly approached gross investments that are the category of real investments.
Gross investments
When it comes to gross investments, primarily meaning precisely actual, but financially can also be attributed to the shaft, if the investor acquires shares of the enterprise with their primary emissions. The means obtained from the primary emission of securities go primarily to the expansion of production assets and intangible assets: the purchase of equipment, rental of premises, the acquisition of a license, etc. Gross investments are investments in the main production facilities and working capital.
The composition of gross investments
The gross investment is primarily aimed at maintaining and expanding the fixed capital, which includes:
- purchase, update and repair of equipment;
- acquisition and repair production premises;
- capital construction, including housing;
- modernization of the production process.
Also gross investments are the source of increasing the volume of working capital. First of all, we are talking about stocks of raw materials and materials that will be needed when expanding production, for example, after opening a new workshop.
An important component of gross investments are funds spent on the purchase of intangible assets:
- licenses and patents;
- inventions and know-how;
- brands and trademarks;
- rights to land plots;
- rights to mineral deposits;
- acquisition of software and software products.
The enterprise's intangible assets also applies to human capital, therefore gross investments can be sent to staff training, health insurance. Such investments contribute to the growth of the prestige of the company in the market and indirectly affect the value of its shares.
The value of the indicator and calculation
Based on the directions of investments, gross investments can be divided into two groups:
- investments that go to repair and maintain already existing production facilities,
- investments sent to expansion of capacity.
The first group is depreciation. For accumulation of this type of investment, depreciation funds create. The volume of the fund is determined by the depreciation coefficient, which is calculated based on the life of a specific type of equipment or a building to their full physical wear. The cost of the asset is transferred finished products, and after its implementation, the embedded amounts accumulate in the depreciation fund.
The second group is investments aimed at increasing capital, they are called clean. These include all types of investments mentioned above, except for amortization.
The formula for calculating gross investment is as follows:
Vi \u003d a + chi where
V - gross attachments;
A - amortization;
Chi - net investment.
The ratio of the magnitude of gross investments and the volume of depreciation suggests at what stage of development is an economic entity. The growth phase is characterized by an excess of gross investment over depreciation. If the situation is reverse, this is an indicator of a lack of production potential.
Gross investments in the macroeconomic system can also be calculated on the basis of gross domestic product, which characterizes the total production of goods and services in the country:
Vi \u003d GDP - RP - RG - RCHE, where
GDP - gross domestic product;
RP - consumer expenses;
RG - state expenses;
RCHE - Costs for clean exports.
Sources of gross attachments
The sources of formation of the total gross investment include:
- own funds enterprises in the form of depreciation and investment funds;
- attachments of third-party investors: Financial (acquisition of securities: shares, bonds, benefits, etc.) and real investments in material and intangible assets;
- bank loans leasing companies and microfinance organizations;
- dotations from the state budget.
Many enterprises are trying third-party investors for their development. This is especially true when implementing investment projects. As a rule, risks in them are large enough, and the company is trying to diversify them by reducing the volume of own investments and an increase in third-party infusion. At the same time, the organization retains complete control over the project.
State funds are involved in the implementation of large projects that are important not only for a specific business entity, but also for the country as a whole. An example of public-private partnerships is often infrastructure projects. There are also cases of state investment of rights to land and mineral deposits. Special mention deserve situations when whole state enterprises are acting as an investment.
Clean investments
Clean investments are part of gross investment, which goes to expand the production potential of the enterprise and an increase in capital. Pure investments are equal to the difference between gross attachments and depreciation.
The indicator of pure investments is important when evaluating the state of the enterprise. The positive value of the indicator means that the enterprise is in the growth phase, develops and expands. The zero value speaks of a simple and negative value signals that the enterprise does not even have enough funds to update the production assets, the organization is in a state of crisis and has a real risk to go bankrupt.
Sources
Sources of pure investments are similar to gross and divided into own funds of the enterprise, clean private investments and borrowed funds banks, leasing and microfinance organizations. The main internal source is the profit from the sale of goods and services and statutory capital. In addition, the internal resources include profits from the sale of unnecessary, already burned property. An indicator of the volume of net investments from internal sources is an indicator of the stability of the organization. It affects the level of confidence in the enterprise of third-party investors and credit organizations.
Value for economics
Clean investments relate to real investments, the purpose of which is to expand the production and ultimately an increase in profits. Clean current value of investment affects not only stability specific enterpriseBut also affect related industries in the country: from construction to health, education and culture. In this way, investment activities Promotes the development of the country's economy as a whole and the growth of the welfare of the population.
The reduction in net investment signals the beginning of the recession in the economy and the approach of the crisis. The level of confidence in investors is reduced, and they translate investments from real financial, which generally aggravates the situation. Thus, work on the removal of the country from the crisis falls on the shoulders of the state.
Investments play important role In ensuring stable development of both a particular organization and the economy, the mills in general. Gross investments belong to real investments and are sent to reproduction and increasing the main and current meansas well as intangible assets. Gross investments consist of depreciation and net investment. Clean investments are the part of the investment that is going on the expansion and modernization of production, the acquisition of patents and licenses, conducting research and professional development. The volume of net investment is an indicator of the stability of the enterprise and affects the level of confidence in external investors and credit organizations.
For increasing production capacity, technical development, improving the state of the material base, enterprises need to produce certain money infants, since to take fundamental funds for these needs is economically inefficient, then you have to look for and use third-party financial investments in the form of gross investment.
Definition
Gross investments - the cumulative amount of funds that investors are investing in new construction, overhaul structures, buildings, acquisition of items and equipment, intangible assets and inventories. They are heading for maintaining and the growth of fixed capital, stocks. With their help, the company's normal functioning is ensured, financial stability, an increase in the profitability of economic entities.
Gross investments are the aggregate amount of investor investment in any investment facility. And this is no matter what form these investments are made and what part of the object they were spent.
Gross internal investment (VVI) - Investments in the country's inhabitants in the products of their state and their expenses coming imported goods. VVI is often expressed in monetary equivalent or in% to GDP.
Structure
The shaft investment includes depreciation, which is investment resources that reimburse the depreciation of fixed assets, the cost of repair, restoration, as well as net investments, i.e., capital investments in unfinished production and inventory stocks.
Clean investments characterize the change in the cost of fixed capital after the amount of wear is accrued.
Main capital, as the main component of gross investment, includes:
- restoration of funds used as a result of moral and physical wear;
- updating production capacity - equipment replacement, changing production technology to more progressive;
- reconstruction, modernization of production;
- housing costs;
- costs for licenses, trademarks, patents, ownership, inventions, know-how.
Gross investments are the costs of a socio-economic nature, that is, investments in human capital: professional development of employees, improving the motivation system, which, in turn, affects the increase in productivity and profitability of the enterprise.
Payment
Gross investments are equal:
- VN \u003d An + CN, where
VN - gross investment in N-M Year;
AN - depreciation in N-M Year;
CN - net investments in N-M Year.
If the value of the introduction of the production potential is reduced, as a result, a decrease in the volume of products (speaking of the macro level, it can be said that the state "eats" its capital, similarly to the level of the enterprise).
When the value of the EN is equal, then does not occur economic growth and the production potential does not change (the state / enterprise is in place).
In the event that the volume of gross investment is more depreciated deductions, the economy is at the stage of development, since there is a wide resumption of its production potential (the state / enterprise has a developed economy).
Sources
The sources of gross investment are:
- own cash investors, individuals, co-investors;
- borrowed funds: bank loans, tools of other financial organizations;
- state budget funds;
- depreciation funds;
- funds from participation in bidding on stock exchanges.
The main investor in order to reduce investment risks on the project invites other interested seinvestors to cooperate.
State funds are spent on gross investments in the case when the project has important For the state. Everything happens in the form of public private partnership - the transfer of rights to the field in private hands of the field or land, state-owned enterprises.
Efficiency
For the enterprise, gross investments are advantageous if they give the calculated profit at the end of the period for the implementation of the planned investment project.
To increase the effectiveness of investments, it is necessary to conduct a competent policy of reproduction of fixed capital and funds that guarantee the restoration of the main production facilities, their quantitative composition and a qualitative technological organization.
The effectiveness of the use of gross investment depends on their structure: composition, direction of use, source of formation. But the fundamental criterion is profitability, it is it that determines the priority of investment.
At the macroeconomic level, excessive investment forms inflation, and insufficient deflation. Such imbalances in the economy are regulated by an effective taxation system, government spending, financial and budget and credit-monetary policy.
ROLE IN ECONOMIC DEVELOPMENT
The role of investments for manufacturers is the following - enterprises seek an increase in productivity rates, profit growth, solid business foundations, individual income due to efficient attraction additional capital In the form of investments that reproduce the main funds, increase stocks.
On the state level Gross investments show the state of the economy, the level of GNP, characterize how popular the products of domestic producers are in demand, whether investors want to invest in it if it is profitable. Based on these data, the state must create optimal conditions for manufacturers so that their products are in demand, both in domestic markets and abroad. For this, the government should provide benefits, subsidies, subsidies, regulate taxation.
Gross investments play a role in economic Development Countries, in building a modern high-tech material and technical base. Also, do not do without investments in the "knowledge economy", the so-called field of education, science, biotechnology, information technology, health care.
