Gross investment. The difference between net and gross investment. Development of the social sphere

Gross investment- This is the total volume of investment resources in all their forms, directed in a certain period for the implementation of real and financial investment.

Gross investment formula

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An effective method of developing and promoting a company is investing values ​​in it. This contributes to the development of large organizations and reduces the risk of bankruptcy. Mid-range enterprises are given the opportunity to grow and form corporations.

Investments

To increase the profitability of a company, its leader must properly manage investment resources. Clean and gross investment have an impact on 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 are the deposits

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

Net investment represents cash flows aimed at increasing the capital of the company involved in ensuring the normal functioning of the economic system and improving the standard of living of the project participants. Gross investment includes investments in property, plant and equipment. They consist of paid for construction services, the object of which is production facilities, from the costs of purchasing new or additional equipment, as well as the costs of its modernization. They reflect the aggregate of net investment and depreciation charges, which cover the depreciation of fixed capital and its restoration to its original state. Net investment is an integral part of gross financing, so the parameters are difficult to identify by one type.

Objects of gross investment

Types of investments

Fixed capital is one of the elements of gross investment. It contains funds for the restoration of its used part in the form of moral and physical wear and tear. At his expense, work is carried out on modernization and reconstruction. technological lines, as well as to upgrade equipment and change technology to modern techniques that provide high rates productivity.

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

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

The composition of gross investment includes contributions to improving human potential and ensuring a decent level of parameters social sphere... Improving the qualifications of employees, improving their housing conditions, payment for the education of children of employees of the organization, imply an increase in the profitability of production. This is due to the high qualifications of employees and their rapid recovery of physical and moral strength, due to the creation of normal living conditions.

Gross investment structure

The indicator that identifies the state of gross investment is taken into account in the system of economic criteria of an individual enterprise and is used in the calculation when compiling statistical reports. It is included in the system of parameters of national government accounts and helps to assess macroeconomic indicators.

The economy of the state is made up of a set of large industries, mid-level businesses and small businesses. People planning to open their own business, or expand an already operating business, need to have at least minimal knowledge economic theory and learn how to put it into practice. Financial literacy implies an understanding of specific terms. Investing should start with profit forecasting. Conducting an investment policy at an intuitive level will inevitably lead to ruin, do not be lazy to learn the basics of economics, this will save capital and even increase assets.

In order for the business to work for many years, competent entrepreneurs understand: it is impossible to spend all the profits on their own needs, part of the profits should be directed to the development of the enterprise. The initial investment in a business can be so great that own funds the owner no longer has, but there is still no tangible profit. If the project is not interesting to the state or local government, and there are not enough funds for development, private investments can come to the rescue. They can be obtained by issuing shares on the domestic market.

Attention! The entire amount of funds received from the sale of shares is called gross investment.

What in simple words gross investment is funds that can be spent on the purchase of materials, the purchase of raw materials, the purchase of new equipment and the construction of new workshops or other buildings that are involved in production, plus the depreciation of existing machines and buildings.

Composition of gross investments

For the economy of a country and an individual enterprise, the indicator of gross investment indicates the true state of affairs. It allows you to make a forecast for the further development of individual objects of private business, state enterprise or the economy of the entire country as a whole.

Important! Gross investment is the amount of investment that is spent on renovation and development.

They are calculated by the formula: And in = A + And h, where And in is the gross investment, A is the cost of depreciation, And h is the net investment. Based on this, we can conclude that the object of gross investment is fixed capital, which is involved in the production of goods and services.

Money

• Replacement of the technical component of the production process;
• Acquisition of technologies to reduce the cost of the final product;
• Reconstruction of equipment and its modernization;
• Housing construction costs.

For analysis economic condition the enterprise should take into account that not the entire volume of investments in working capital for the entire period of the existence of production is considered, but only fluctuations in a separate time period. Based on this analysis technique, one can observe overall growth investment, and reduced investment of working capital. For example, such a situation may look like this: the enterprise has implemented modern technology, thanks to which the consumption of raw materials has decreased, the final cost of the product has decreased. Investments in the purchase of raw materials have been reduced, and the freed up funds can be used for other purposes.

Development of the social sphere

In addition to material investments, gross investments can be used for social projects, raising the cultural level and education of the employees themselves and their children. By investing in this area, the investor does not engage in charity work, but relies on higher productivity of highly qualified labor. In addition, a person whose life is fully adjusted is capable of a higher return than an employee burdened with debts and homeless.

Difference between gross and net investments

Despite the apparent similarity in terminology, one should not confuse net and gross investment. Net investment is part of the gross investment. Another part of gross investment is compensation for capital recovery and renewal costs.

Important! In accounting, there is a separate expense item where depreciation funds are taken into account.

For the restoration of fixed capital, transfers are made, which are calculated by transferring the cost of fixed capital to the product of production for the reporting period. The choice of amounts for deduction to the depreciation fund is not random, but is calculated according to a coefficient, the indicator of which differs for each type of equipment or buildings. Service life standards are 1-10 years for equipment and up to 50 years for real estate. The end of these regulatory deadlines does not mean at all that the serviceable equipment will be decommissioned, and not the damaged building is subject to demolition. The work will continue, the fixed asset is also on the balance sheet, only that depreciation is no longer charged.

Intangible assets

In addition to factories and ships, intangible assets are also involved in production. So, all buildings are located on land plots, and without defining the ownership of the land, it is impossible to build on it. Intangible, but very expensive assets include all kinds of rights:

• To plots
• To the deposits
• For logos, company names and trademarks;
• Licenses, patents and software.

The value of intangible assets is comparable to the value of tangible assets, and sometimes even exceeds it.

Sources of financing

Investors have the right to use their own and borrowed funds, attract from investors. Budget resources can also become a source of gross investment, they are attracted to finance objects that are of particular importance to the state. Raising capital serves to reduce the risks of the business owner and gives the opportunity to control the object.

How quickly you can find out by reading our article.

The role of gross investment in the macro and micro economy is enormous, because development is impossible without capital inflows. Investments can be spent on depreciation deductions, purchase of raw materials, acquisition of patents, purchase Vehicle, construction of structures that will subsequently be involved in production.

Key difference: Gross investment refers to the total cost of purchasing property, plant and equipment over a specified period of time, excluding depreciation. On the other hand, net investment includes depreciation and is calculated by subtracting depreciation from gross investment.

Investments refer to the amount invested in the acquisition of financial assets. The investment is made in order to get a good target income over a period of time. Target income can be in any of the forms, such as an increase in the value of assets or valuable papers... It can also apply to regular income from securities or assets. Exists different kinds investments such as autonomous, incidental, financial, real, planned, unplanned, gross and net.

Gross investment refers to the amount invested in the purchase or construction of new capital goods. Net investment is also related to gross investment. This is basically gross investment less depreciation of existing capital. This depreciation relates to some of the investments that need to be made to replace obsolete or worn out assets such as factories and equipment.

Or we can say that, Net Investment = Gross Investment - Depreciation

If gross investment exceeds depreciation for any period of time, then this directly indicates that net investment is positive, which also means an increase in fixed capital.

Likewise, if the gross investment is less than depreciation, then in this case the net investment tends to be negative and the capital stock decreases.

To understand the difference, consider this example: a plant starts the year with 20 cars. He buys 5 cars. 10 cars are worn out. Now the gross investment relates to the purchase of new machines, which is 5, whereas at the end of the year the total number of working machines = 20 + 5-4 = 21. This results in an actual increase of 21-20 = 1 machine. which reflects the net investment.

Thus, gross investment is the total amount spent on goods to produce other goods and services, while net investment is an increase production stocks.

Comparison of net and gross investments:

Essence of gross investment

There are several approaches to the concept of gross investment:

• The first approach is expressed at the macroeconomic level. Gross investment is the total investment in a country's economy as a whole.
• The second approach considers gross investment as investments that are aimed at supporting and increasing the volume of the company's fixed capital and stocks.
• The third approach implies by gross investment all the total investments of the investor that were made in the investment project.

Consider gross investment in terms of investments in fixed assets and stocks.

Remark 1

With this approach, gross investment includes depreciation as well as net investment (that is, less depreciation). In this case, depreciation acts as an investment resource, since cash deducted for amortization in the present are "temporarily free" funds. Net investment involves investments in improving production activities, new investment projects... In this aspect, gross investment is often called capital investment.

Further, gross investment is considered in the aspect of the second approach. Since the consideration of gross investment as a source of growth for the fixed capital of an enterprise is the most important in the aspect of microeconomics.

Consider the composition of gross investment.

Composition of gross investments

Since the main object of the considered type of investment is fixed assets, the following possible composition of gross investment is distinguished:

• deductions for the restoration of capital involved in production activities at the enterprise using depreciation mechanisms, deductions for the restoration of technical and obsolescence of equipment, fixed assets on the balance sheet of the enterprise;
• replacement of the production facilities of the enterprise with more modern equipment and fixed assets;
• modernization, renewal of production;
• investments aimed at the construction of buildings, structures.

Also, the composition may include not only investments in fixed assets, but also in intangible assets. For example, in the acquisition of patents, know-how, trademarks and brands, licenses to carry out a certain type of activity, software and software products.

So, in general, gross investment can be divided into two groups:

• investments, the purpose of which is the restoration and renewal of production, fixed assets (depreciation);
• the second group - investments that are aimed at increasing the volume of the company's capital, increasing assets (net investment).

main sources

Among the sources of gross investment are investors' funds, loans from banking institutions, state funds (state support), funds from exchange trading, depreciation deduction funds.

Formula for calculation

Consider the calculation of the gross investment in the enterprise. The first considered group of investments is calculated as depreciation and depreciation charges corresponding to the fixed asset.

So, the formula for gross investment is presented below.

Gross investment in the period under review = depreciation in the period under review + net investment in the period under review

This formula is also used in macroeconomics to calculate the total gross investment in a country. Also, the total gross investment in the country is used to calculate the Gross Domestic Product by expenses.