Methods used in assessing the economic efficiency of investment projects can be combined into two main groups - simple (static) and complex (dynamic).

The methods of the first group use accounting ones, i.e. indicators reflected in the financial statements - investment costs, profit, depreciation.

Methods of the second group use discounted values ​​of indicators.

Simple Methods

In practice, to determine the economic efficiency of investments in a simple way, two methods are most often used: calculating the simple rate of return and the payback period.

Simple rate of return - (ROI- return on investments) calculated as the ratio of net profit (Pr) for one period of time (usually a year) to the total investment costs (I):

Economically, the meaning of a simple rate of return is to estimate what portion of investment costs is recovered as profit during one planning interval. By comparing the calculated value of the simple rate of return with the minimum or average level of profitability, the investor can make preliminary conclusions about the feasibility of these investments, as well as whether the analysis of the investment project should be continued. In addition, at this stage, an approximate estimate of the payback period of this project is possible.

In a number of cases, when calculating the simple rate of return indicator, the ratio of income (cash flow) to the amount of investment costs is actually determined:

where A is depreciation.

Investment costs in the expressions presented above mean the costs of forming fixed and working capital.

This approach does not take into account the reduction of capital investments as a result of depreciation to their residual value.

The indicator is devoid of this drawback

In this case, the ratio of income to the average capital for the period of project implementation is determined.

In most projects, the distribution of income across years of implementation is uneven. In this case, the numerator of the indicator must use average income:

In this expression, T is the period of project implementation.

Payback period - another indicator in the group of simple methods for assessing effectiveness. The payback period of a project characterizes the period of time during which the amount of one-time costs is covered by profit and depreciation charges from the project. Using this indicator, the period during which the project will work “for itself” is calculated, i.e. the entire volume of funds generated by the project, which includes profits and depreciation, is used to return the initially invested capital.

The formula for calculating the payback period can be presented as follows:

Where PP (payback period)- return on investment indicator (payback period); I0 (investment) - initial investment; R- net annual cash flow from the implementation of the investment project.

Calculation of the payback period can also be carried out by calculating the accumulated amount of depreciation charges and net profit. The period during which this amount becomes equal to the initial investment is called the payback period.

Complex Methods

The decision to invest capital is determined in most cases by the amount of income that the investor expects to receive in the future. When making such decisions, the time factor plays a very important, if not decisive, role. In this regard, the problem arises of accounting for expenses and income spread over time. To solve it, you need a correct understanding of the time value of money and the method of discounting cash flows.

The concept of time value of money can be formulated as follows: money today is worth more than the same amount we will receive in the future. This fact is due to the following circumstances.

1. Today's money can be invested and receive additional money in the form of interest.

2. The purchasing power of money may fall over time due to inflation.

3. You cannot be completely sure that you will receive money in the future.

Thus, in order to make time-effective financial decisions, it is necessary to use appropriate methods that allow take into account the time aspect of the value of money.

Transformations of cash flow elements are carried out by applying incremental and discounting operations. Accrual is the process of determining the future value of money. Discounting is the process of bringing money to its current value. In the first case, they move from the “present” to the future, in the second, on the contrary, from the future to the present. In both cases, using the compound interest scheme, it is possible to obtain an assessment of cash flow from the perspective of the future or “present”.

When analyzing payment flows, general indicators are used:

· increased cost;

present value;

· rate of return.

Net present value

Since funds are distributed over time, the time factor plays an important role here too.

When assessing investment projects, the calculation method is used net present value, which involves discounting cash flows: all income and costs are reduced to one point in time.

The central indicator in the method under consideration is the indicator NPV(net present value) – the current value of cash inflows minus the current value of cash outflows. This is the generalized final result of investment activity in absolute terms.

For a one-time investment, the calculation of net present value can be represented by the following expression:

Where R k – annual cash receipts during n years,

k= 1, 2, …, n;

IC– start-up investments;

i- discount rate.

An important point is the choice of discount rate, which should reflect expected average level of loan interest in the financial market.

To determine the effectiveness of an investment project by an individual company, the discount rate is used weighted average cost of capital used by the company to finance this investment project.

The NPV indicator is an absolute increase, since it estimates how much the present income covers the present costs:

· at NPV> 0 the project should be accepted;

· at NPV< 0 проект не принимается,

· at NPV= 0 the project has neither profit nor loss.

Example. The company is considering the feasibility of an investment project, the cost of which is 210 thousand dollars. Annual revenues are projected to be $55,000. The project is designed for 5 years. The required rate of return is 8%. Should this project be accepted?

Solution:

The net cost of the project is:

NPV= 55"000 (1.08)-1 + 55"000 (1.08)-2 + 55"000 (1.08)-3 + 55"000 (1.08)-4 + + 55"000 ( 1.08) -5 - 210"000 = 50"926 + 42"867 + 39"692 + 36"751 + 34"029 - 210"000 = = 204"265 - 210"000 = -5"735 dollars.

Since the net present value is -5"735 dollars, i.e. NPV< 0, то проект не может быть принят.

One of the factors determining the net present value of a project is the scale of activity, which is expressed in physical volumes of investment, production or sales. Therefore, the use of this method is limited for comparing different projects: a higher value NPV will not always correspond to more efficient use of investments. In such a situation, it is advisable to calculate the indicator return on investment(profitability index) (PI-profitability index): Formula for determining P.I. has the following form:

The return on investment (profitability) index is a relative indicator characterizing the level of income per unit of cost. The higher it is, the greater the return on investment for this project. Index P.I. used when choosing a project from a number of alternatives that have similar NPV with different amounts of investment.

A project is effective if the project's profitability index is greater than 1.

Example. Calculate the PI indicator if the initial investment is 25 million rubles, the net return at the end of the first year is 15 million rubles, at the end of the second year - 10 million rubles, and the third year - 8 million rubles. , discount rate – 12%.

PI =/25=27.05/25 = 1.08.

Payback period

To analyze investments, an indicator such as payback period(payback period method) – the length of time during which the projected cash receipts discounted at the time of completion of the investment are equal to the amount of the investment. In other words, this is the sum of years required to recoup the initial investment:

those. NPV= 0.

The payback period can be determined as the expected number of years using a simplified formula:

DPP = Number of years before the payback year + (Non-recovered cost at the beginning of the payback year / Cash inflow (discounted) during the payback year) This indicator determines the period during which the investment will be “frozen”, since real income from the investment project will only begin to flow after the payback period has expired.

Example. Calculate the payback period of a project for which the investment amount is 1 million rubles, and cash receipts over 5 years will be: 200; 500; 600; 800; 900 thousand rubles. respectively. Discount rate 15%.

Solution: Calculate discounted cash flow:

Project payback period: DPP to= 3 + 54 / 458 = 3,12

Thus, the period actually required to recoup the invested amount will be 3.12 years or 3 years and 44 days.

If income can be represented in the form of a permanent annuity, then

Internal rate of return

When analyzing the effectiveness of investment projects, the indicator is widely used internal rate of return(IRR– internal rate of return) is a discount rate that equates the amount of present income from an investment project to the amount of investment, i.e. investments pay off, but do not bring profit. The value of this rate is completely determined by the “internal” conditions characterizing the investment project.

The application of this method comes down to sequential iteration (repetition) of finding the discount factor until equality is achieved NPV= 0.

Two values ​​of the discount factor are selected at which the function NPV changes its sign, and use the formula:

The investor compares the received value IRR with the rate of attracted financial resources ( CC– Cost of Capital):

· If IRR > CC, then the project can be accepted;

· If IRR< СС , the project is rejected;

· IRR = SS the project has zero profit.

Solution: Calculation at 5% rate:

NPV= 47619 + 181406 + 388767 + 411351 + 470116 - 1200000 = 299259.

Because the NPV> 0, then the new discount rate must be greater than 5%.

Calculation at a rate of 15%:

NPV= 43478 + 151229 + 295882 + 285877 + 298306 - 1200000 = -125228.

We calculate the internal rate of return:

IRR= 5 + ] (15 - 5) = 12,05.

The internal rate of return of the project is 12.05%.

The accuracy of the calculation is the inverse of the interval between the selected interest rates, therefore, to clarify the interest rate, the length of the interval is taken as 1%.

Example. Clarify the bet amount for the previous example.

Solution: For an interest rate of 11%:

NPV= 45045 + 162324 + 329036 + 329365 + 356071 - 1200000 = 21841.

For an interest rate of 12%:

NPV= 44643 + 159439 + 320301 + 317759 + 340456 - 1200000 = -17402.

Specified value: IRR= 11 + ] (12 - 11) = 11,56.

The rate of 11.56% is the upper limit of the interest rate at which a company can recoup a loan to finance an investment project.

The IRR indicator can be used to rank projects by degree of profitability. It can also be used to assess the level of risk: the more the IRR exceeds the cost of capital, the greater the margin of safety of the project and the more insensitive to market fluctuations when estimating the value of future cash flows.

Every large company that involves investing in various projects in its activities must first of all make a thorough assessment of the effectiveness of its investments. As you know, the essence of any investment is to ultimately make a profit. In this case, expense items must always be covered by future income from investment activities. That is why, before investing capital in a particular project, the company is obliged to evaluate the effectiveness of investments, which will help to find out how profitable or, conversely, unprofitable, the upcoming investment will ultimately be.

It must be said that the effectiveness of investments very much depends on many factors, and is determined by solving various problems in the aggregate. In this case, the main goal in determining efficiency is not only the full return of the invested funds, but also the receipt of income from previously made investments. That is, a clear action plan is drawn up, aimed at helping to predict as accurately as possible the further development of events that will occur when investing in a certain investment instrument. The most promising and effective way of investing now is venture capital.

Therefore, speaking in accessible language, investment efficiency usually means achieving the best possible results with minimal risks and costs.
Accordingly, if the effectiveness of the project during analysis and evaluation turns out to be negative for the company, then the investment should not be implemented, since this will be associated with huge risks for the company. If the planned activities show that the enterprise will consistently receive its expected profit at the end of the project, then it will definitely be accepted for execution.
However, before deciding to invest, the company has to do difficult work to determine the effectiveness of the upcoming investments.

What does investment performance evaluation include?

For any serious company, and not only serious ones, that makes decisions to invest in various projects or investment funds, this action is a very responsible step. Therefore, it is very important at the initial stage to conduct a thorough assessment of the upcoming costs and subsequent profits in order to ultimately avoid all risks and remain profitable.
In practice, it is customary to distinguish several main types of investment efficiency assessment:

1. Financial definition of efficiency. In this case, it is characteristic to identify the effectiveness (attractiveness) of upcoming investments for the investors themselves. This assessment is based on the fact that the expected part of the return will be determined, which will suit all parties to the investment process. However, all other investment processes are not taken into account in this assessment of efficiency.

2. Economic definition of investment efficiency. In this case, all upcoming costs and expenses are taken into account, which are correlated with the final results. What is most noteworthy is that it also takes into account those costs that may go beyond the initial interest of all participants in the investment project.

3. Budget determination of investment efficiency. This indicator reveals how strong the monetary consequences for the budget will be from investing in a specific project. Therefore, you can include costs associated with paying taxes, additional fees and other expenses.

Depending on the specific type of investment efficiency assessment, appropriate methods and tools will be applied when carrying out investment forecasting, management, analysis and evaluation.
Besides, In world practice, there are many different ways to assess the effectiveness of investments, which can be conditionally combined into several main groups:

1. The most traditional methods of determining the effectiveness of investments are carried out by calculating the coefficient in the ratio of positive financial receipts to negative monetary costs.

2. Methods for assessing efficiency after the financial statements have been fully analyzed.

3. Methods for determining the effectiveness of investments, which are based on the theory of “time value of finance.”

It is thanks to these methods that it becomes possible to carry out the most complete analysis and assessment of the effectiveness of investing in specific projects. However, no matter what method is used, they are always based on one single task: the company, in the process of implementing the project, must necessarily receive its income, without interfering with the interests of all other participants in investment activities.

That is why assessing the effectiveness of investments is an integral part for any organization when making a decision to invest finances in a particular project.

When you decide where to invest money - in compulsory medical insurance or, for example, in real estate, you manage it. So, for your investments to be most effective, you must choose the right investment method, because only you decide))

Economic effect of investments E- this is a cost assessment of increasing labor productivity, improving quality and increasing production output, reducing its cost, due to investments in investment projects. The criterion (quantitative measure) of the economic effect is the increase in profit for the development option proposed in the project compared to the base (existing) option.

Efficiency is the ratio of the result of an activity to the resources spent. Efficiency is perceived as a characteristic of the system’s ability to produce an economic effect equal to the difference between the result of economic activity and the costs incurred to obtain it and use it, or operate it. Economic efficiency characterizes the effectiveness of using limited resources, that is, the extent to which needs are met with the chosen method of using resources.

Economic efficiency E investment is a relative economic effect:

E = E /I = 4,266 / 8000 = 0,00053 (3.1.1) 13

showing the share of the annual economic effect E in investments I. Reciprocal value E, represents the payback period of the investment:

Distinguish absolute economic efficiency (effect) of investments for a certain option and comparative economic efficiency of investments according to various options.

Selecting an investment discount rate

The effectiveness of long-term investments (for a period of more than a year) is assessed based on discounted cash flow analysis. Discounting operation– this is bringing the economic indicators of the project at different time intervals to a comparable level.

Discount rate (capitalization) represents the relative annual change in the value of investment resources invested in an investment project at various stages of its implementation. The discount rate reflects, firstly, the change in the cost of investment resources due to the possibility of alternative investment directions; secondly, changes in the cost of resources due to inflationary processes. The discount rate is also called opportunity costs, since it represents the profitability (efficiency) that an investor gives up by investing resources in a project rather than in other income-generating instruments.

Discount rate.

Select the discount rate based on the expected growth rate of the market value of shares investor enterprises:

, (3.2.5) 15

Where d– annual dividend payments on shares of the investing enterprise,

R A– price of shares of the investor enterprise;

g– expected (predicted) rate of dividend growth.

The discount rate is:

r=16%*0.8+6%*0.2=12,8+1,2=14%

Net present value (net present value) of an investment

The net present value criterion is historically the earliest method for assessing investment performance proposed by Alfred Marshall in the work “Fundamentals of Economic Science” (1890). The method is based on comparing the value of the initial investment ( I) with the total discounted net cash flows over the forecast period T. Let's denote annual income
. Total accumulated value of discounted income PV (Present value) and net present value NPV (Net present value) are calculated using the formulas:

, (3.3.1) 17

. (3.3.2) 18

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:

. (3.3.3) 19

If annual incomes are ordered streams of payments, then formulas for modern values ​​of the corresponding annuities can be used.

Net present value NPV is criterion for evaluating an investment project, because if NPV > 0 , then the project should be accepted, NPV< 0 , then the project should be rejected, NPV = 0 , then the project is neither profitable nor unprofitable.

Economic indicator NPV reflects a forecast assessment of changes in the economic potential of the enterprise in the event of project implementation; represents the income from the project if the investment is made using borrowed funds, and the loan is issued at an interest rate r. The indicator is additive, that is NPV different projects can be summarized, which allows it to be used when analyzing the optimality of an investment portfolio. Absolute value NPV depends on the choice of time of assessment. When the discount rate increases, the value NPV decreases.

Making decisions related to investment of funds is an important stage in the activities of any enterprise. To effectively use raised funds and obtain maximum return on invested capital, a thorough analysis of future income and costs associated with the implementation of the investment project under consideration is necessary.

The task of the financial manager is to select such projects and ways of their implementation that will provide a cash flow that has the maximum present value compared to the cost of the required capital investment.

There are several methods for assessing the attractiveness of an investment project and, accordingly, several key performance indicators. Each method is based on the same principle: as a result of the implementation of the project, the enterprise should make a profit (the enterprise’s equity capital should increase), while various financial indicators characterize the project from different angles and may meet the interests of various groups of people related to this enterprise - creditors, investors, managers.

When assessing the effectiveness of investment projects, the following main indicators are used:

Investment payback period - PP ( Payback Period )

Net present value – NPV ( Net Present Value )

Internal norm profitability –IRR (Internal Rate of Return)

Modified internal norm profitability – MIRR (Modified Internal Rate of Return)

Profitability investment – R (Profitability)

Index profitability – PI (Profitability Index)

Each indicator is at the same time a decision-making criterion when choosing the most attractive project from several possible ones.

The calculation of these indicators is based on discount methods that take into account the principle of the time value of money. In most cases, the weighted average cost of capital WACC is chosen as the discount rate, which, if necessary, can be adjusted to indicators of the possible risk associated with the implementation of a specific project and the expected level of inflation.

If the calculation of the WACC indicator is associated with difficulties that raise doubts about the reliability of the result obtained (for example, when estimating equity capital), you can choose the average market return adjusted for the risk of the analyzed project as the discount rate. Sometimes the refinancing rate is used as a discount rate.

The main stages of assessing the effectiveness of investments

1. Assessment of the financial capabilities of the enterprise.
2. Forecasting future cash flow.
3. Selecting a discount rate.
4. Calculation of key performance indicators.
5. Consideration of risk factors

Key performance indicators (criteria)

Payback period

In the general case, the required value is the PP value, for which the following holds:

РР = min N, at which ∑ INV t / (1 + i) t = ∑ CF k / (1 + i) k

where i is the selected discount rate

Decision criterion When using the payback period calculation method, it can be formulated in two ways:

a) the project is accepted if the payback as a whole takes place;

b) the project is accepted if the found PP value lies within the specified limits. This option is always used when analyzing projects that have a high degree of risk.

A significant drawback of this indicator as a criterion for the attractiveness of a project is that it ignores positive cash flow values ​​that go beyond the calculated period.

Also, this method does not distinguish between projects with the same PP value, but with different distribution of income within the calculated period. Thus, the principle of the time value of money when choosing the most preferable project is partially ignored.

Net present value NPV

The difference between the present value of future cash flow and the value of the initial investment is called net present value project (net present value).

The NPV indicator reflects a direct increase in the company's capital, therefore it is the most significant for the company's shareholders. Net present value is calculated using the following formula:

NPV = ∑CF k / (1 + i) k - ∑ INVt / (1 + i) t

The criterion for project acceptance is a positive value NPV . In cases where it is necessary to make a choice from several possible projects, preference should be given to the project with a larger net present value.

At the same time, a zero or even negative NPV value does not indicate the unprofitability of the project as such, but only its unprofitability when using a given discount rate. The same project implemented by investing cheaper capital or with a lower required return, i.e. with a smaller value of i, can give a positive net present value.

It must be borne in mind that PP and NPV indicators may give conflicting estimates when choosing the most preferable investment project.

Internal rate of return IRR

A universal tool for comparing the effectiveness of various methods of investing capital, characterizing the profitability of an operation and independent of the discount rate (the cost of invested funds), is the internal rate of return indicator IRR.

The internal rate of return corresponds to the discount rate at which the present value of the future cash flow coincides with the amount of invested funds, i.e. satisfies the equality:

∑ CF k / (1 + IRR) k = ∑ INV t / (1 + IRR) t

To calculate this indicator, you can use computer tools or the following approximate calculation formula:

IRR = i 1 + NPV 1 (i 2 – i 1) / (NPV 1 - NPV 2)

Here i 1 and i 2 are rates corresponding to some positive (NPV 1) and negative (NPV 2) values ​​of net present value. The smaller the interval i 1 – i 2 , the more accurate the result obtained (when solving problems, the difference between bets is considered to be no more than 5%).

The criterion for accepting an investment project is exceeding the indicator IRR selected discount rate ( IRR > i ) . When comparing several projects, projects with large IRR values ​​are more preferable.

The undoubted advantages of the IRR indicator include its versatility as a tool for assessing and comparing the profitability of various financial transactions. Its advantage is its independence from the discount rate - this is a purely internal indicator.

The disadvantages of IRR are the complexity of calculation, the impossibility of applying this criterion to non-standard cash flows (the problem of multiplicity of IRR), as well as the need to reinvest all received income at a rate of return equal to the IRR implied by the rule for calculating this indicator. The disadvantages include a possible contradiction with the NPV criterion when comparing two or more projects.

Modified internal rate of return MIRR

For non-standard cash flows, solving the equation corresponding to the definition of the internal rate of return, in the vast majority of cases (non-standard flows with a single IRR value are possible) gives several positive roots, i.e. several possible values ​​of the IRR indicator. In this case, the IRR > i criterion does not work: the IRR value may exceed the discount rate used, and the project under consideration turns out to be unprofitable (its NPV turns out to be negative).

To solve this problem, in the case of non-standard cash flows, an analogue of IRR is calculated - the modified internal rate of return MIRR (it can also be calculated for projects generating standard cash flows).

MIRR is an interest rate at which, when accrued during the project implementation period n, the total amount of all investments discounted at the initial moment results in a value equal to the sum of all cash inflows accrued at the same rate d at the end of the project:

(1 + MIRR) n ∑ INV / (1 + i) t = ∑ CF k (1 + i) n-k

Decision criterion - MIRR > i . The result is always consistent with the NPV criterion and can be used to evaluate both standard and non-standard cash flows. In addition, the MIRR indicator has another important advantage over IRR: its calculation involves reinvesting the income received at a rate equal to the discount rate (close or equal to the average market rate of return), which is more consistent with the real situation and therefore more accurately reflects the profitability of the project being evaluated.

Profitability rate and profitability index P

Profitability is an important indicator of investment efficiency, since it reflects the ratio of costs and income, showing the amount of income received for each unit (ruble, dollar, etc.) of invested funds.

P =NPV / INVx 100%

Profitability index (profitability ratio) PI- the ratio of the present value of the project to the costs shows how many times the invested capital will increase during the implementation of the project.

PI = [∑ CF k / (1 + i) k ] / INV = P / 100% + 1

The criterion for making a positive decision when using profitability indicators is the ratio P > 0 or, which is the same, PI > 1. Of several projects, those with higher profitability indicators are preferable.

This indicator is especially informative when assessing projects with different initial investments and different implementation periods.

The profitability criterion may produce results that contradict the net present value criterion if projects with different amounts of invested capital are considered. When making a decision, it is necessary to take into account the investment opportunities of the enterprise, as well as the consideration that the NPV indicator is more in line with the interests of shareholders in terms of increasing their capital.

Evaluation of investment projects of different durations

In cases where doubt arises about the correctness of comparison using the considered indicators of projects with different implementation periods, you can resort to chain repeat method

When using this method, the least common multiple of the n deadlines for the implementation of n 1 and n 2 of the evaluated projects is found. They construct new cash flows obtained as a result of several project implementations, assuming that costs and income will remain at the same level (the beginning of the next implementation coincides with the end of the previous one). The net present value of multiple sales will change, but the internal rate of return will remain the same regardless of the number of repetitions, although the new cash flows may be unusual if the initial investment is greater than the earnings in the last period of sales.

Using this method in practice may involve complex calculations if several projects are being considered and in order to meet all deadlines, each will need to be repeated several times.

The main disadvantage of the chain repetition method is the assumption that the conditions for the implementation of projects, and therefore the required costs and income received, will remain at the same level, which is almost impossible in the modern market situation. Also, the re-implementation of the project itself is not always possible, especially if it is quite long or relates to areas where rapid technological updating of manufactured products occurs.

In addition to the considered quantitative indicators of investment efficiency, when making investment decisions, it is necessary to take into account the qualitative characteristics of the project’s attractiveness, corresponding to the following criteria:

• Compliance of the project under consideration with the overall investment strategy of the enterprise, its long-term and current plans;
• The prospects of the project in comparison with the consequences of refusing to implement alternative projects;
• Compliance of the project with accepted regulatory and planning indicators regarding the level of risk, financial stability, economic growth of the organization, etc.;
• Ensuring the necessary diversification of the financial and economic activities of the organization;
• Compliance of project implementation requirements with available production and human resources;
• Social consequences of the project, possible impact on the reputation and image of the organization;
• Compliance of the project under consideration with environmental standards and requirements.

In general, this is not new for us. We came into contact with it, for example, when we talked about calculations, determining the effectiveness of investments in, etc.

Today's publication aims to bring together the theory of definition, focusing on a brief overview of the relevant tasks.

The article in no way duplicates previous publications; on the contrary, it complements and deepens their content.

We remember that the main goal of investing is to get more bang for your buck. In other words, get .

To a rough approximation, the HIGHER the profit, the.

We already know that investments can be (for example, in state bonds) and long-term (real estate, most types, if you look at them from the perspective of investment, and not).

The investment objects themselves also differ, including:

Material (real, for example, the same) and

Intangible (patents, marks and other so-called objects), as well as

financial assets combining investments in and.

The timing of investment and the type of investment object influence the choice of METHOD determining investment efficiency.

Methods for determining investment efficiency

Any investment is preceded (deep or not) by the ratio of upcoming investment expenses in the near future and expected future ones.

In this case, the known indicator ( rates of return), giving an initial idea of ​​the effectiveness of investments.

Numerically, it is equal to the ratio of expected income to the amount of invested funds.

We are well aware of the second feature that any instrument can “boast” of. This - .

In investment theory it is customary to divide methods for determining investment efficiency to those characteristic of conditions of high risk and uncertainty and minimal risk (certainty of income).

To the first group methods include: analytical, statistical, expert assessments. To the second: static methods and dynamic methods.

ABOUT static methods remember if you need to analyze investments over one period, when expenses are taken into account at the beginning and income at the end of the period.

Dynamic Methods Investment performance estimates apply to long-term investments where combinations of expenses and income are allowed over the period under review.

Risk assessment

Investment efficiency assessment is unthinkable apart from the inherent risks.

In order not to repeat previous publications, we will briefly note some key risks that cannot be ignored.

We are talking, first of all, about the impact of the following risks:
failure to comply
low,
long-term security,
,
impact.

For government securities, the risk of FAILURE to fulfill obligations is extremely low, although it is not completely excluded (remember, for example, the story with the same GKOs).

The reliability of securities from this point of view can be assessed with the help of well-known specialized companies (Fitch, Moody’s, etc.).

No one is immune from low liquidity (as well as from bad weather), although understanding some economic patterns and internal mechanisms of companies' functioning can significantly reduce the impact of this risk when choosing acceptable financial instruments.

The length of the period of circulation of securities until their redemption proportionately increases the size of the corresponding risk premium.

The impact of TAXATION depends on the type and type of financial instrument (income from investments in bank deposits, as a rule, is not subject to taxes, which cannot be said about investments in shares, where different tax rates are allowed).

As for , its size must certainly be taken into account in calculation formulas (especially in cases of high or galloping inflation).

Otherwise, the investment can certainly be considered profitable, and vice versa.

One final note. The risks of loss of investment income should always be assessed as less significant than the risks of loss of invested capital.

This is precisely what underlies the security ratings mentioned above.