The investment process plays a huge role in the economy of any country. If investments are made, the economy grows, new enterprises appear, the population has more money on hand, which is again invested in the economy.
If investments are reduced or not carried out at all, the economy begins to decline, the standard of living falls. To understand how to manage this process, it is necessary to consider the concept, sources, types of investments.
Investments are the investments of money in any assets. These can be stocks, bonds, buildings and structures (see), equipment, etc.
Note! Investments can be made not only by companies and enterprises, but also by individuals. In addition to buying securities or investing savings in foreign currency, the purchase of various goods with a long service life, such as household appliances, is also considered an investment.
The purpose of investment is to earn additional income or profit. For example, the purchase of securities is done in the expectation that the stock price will rise and the investor will receive additional income.
The construction of a new production workshop or the purchase of new equipment is carried out to produce a larger volume of products, which means an increase in the revenue and profit of the enterprise. Even installing plastic windows or water meters is an investment.
Indeed, in this case, there is a reduction in utility costs, therefore, free cash at the family. For further consideration of the question, what is the essence, types and sources of investments, it is necessary to classify investors.
So, investors are:
- private;
- corporate;
- institutional.
Private investors include all individuals who somehow disposed of their savings - invested them in securities, made a bank deposit, purchased real estate or durable goods.
Note! The most popular direction of investment among individuals is real estate. However, the threshold for entering this market is very high - a sufficiently large amount of funds is required to purchase an apartment, office or house. Therefore, many professionals recommend paying attention to the art market. Securities and precious metals require constant attention and monitoring of their current price in the market. Paintings and sculptures are also available for purchase, and are almost guaranteed to appreciate in value over time.
Corporate investors make investments on behalf of legal entities. Basically, they invest in the development or renovation of production and equipment. However, if they have free cash, then corporate investors may well put them on deposit or purchase securities or currencies in the hope of receiving additional income.
Institutional investors are usually professional participants. They constantly play on the stock exchange and earn a profit due to this. For them, investing is a profession.
They even attract funds from the public and corporations to manage them and thus earn profit for themselves and bring additional income to customers. Having considered the classification of investors, we can name.
So:
- Real investment or capital investment– investment in production assets. They are carried out, as a rule, by corporate investors, financing the construction of new buildings, structures, purchasing equipment.
- Portfolio investment- investments in various securities. They are carried out by institutional investors, professionally playing on the stock exchange.
- Consumer investment- the purchase of goods with a long period of use or real estate, art objects. They are carried out mainly by private investors.
Thus, we analyzed what investments are, their concept, types, and we will consider the sources below.
Investment sources
Investments can be made from the following sources:
- own funds- it can be accumulated profit or equity for corporate investors, or personal savings for private investors;
- funds from budgets and extrabudgetary funds- these can be government investments in the construction of infrastructure (for example, roads), subsidies for the development of entrepreneurship or the organization of business incubators and technology parks, and so on;
Note! The Pension Fund of Russia is one of the largest institutional investors. The savings of citizens in it are invested in government bonds of the Russian Federation. Such investments have a minimum risk, but also a minimum return. Therefore, when deciding where to store your pension savings, you make an investment decision, making a choice between high profitability and high reliability.
- loans and credits, and other attracted funds– raising funds is typical for corporate and institutional investors. The former attract funds for the implementation of investment projects. The second - to increase the amount of funds under their own management, and therefore, to increase their own profits;
- foreign investment– funds received by corporate or institutional investors from their foreign partners. They are invested, as a rule, within the framework of instructions received from the owners of the funds.
So, in this article, investments, their concept, sources, types were considered. Recommendations were also made for directions for private investment. For the country's economy, real investments are more profitable - in production.
However, in Russia now dominated by portfolio. This situation can be changed. To do this, you need to invest your own savings in the bank or purchase any domestically produced durable goods. As a result, the money will remain in the economy and will contribute to its development.
In connection with the transition of the economy to market conditions, more attention has been paid to investments. They are property in the form of shares or shares, securities or money, technology or machinery and equipment, licenses or loans that are invested in an enterprise to make a profit and achieve certain social progress. In other words, the financing of investment projects is a long-term investment of monetary, property and intellectual capital. They are called upon to implement various programs in various sectors of the country's national economy.
The current legislative acts directly indicate the sources of investment financing. These include:
Own reserves of the enterprise;
On-farm resources of investors;
Monetary savings of legal entities and individuals;
Compensation received by the enterprise for insured events;
Borrowed and Investor;
Financial capital obtained as a result of centralization of associations of enterprises;
Government appropriations;
Investments from abroad.
The main investments that are drawn from their own reserves are profits and an amortization fund. The income of the enterprise is part of the cash proceeds. It is calculated by subtracting from the amount received from the sale of finished products the amount of costs incurred in its manufacture. After making all payments and taxes, the company has a net profit. An enterprise can use a certain part of it for capital investments, both social and industrial. Income, which will be a source of investment, is part of the accumulation fund. Investments can also be made from another reserve, similar in purpose, created at the enterprise.
Amortization fund is also included in own sources of financing. This is a fairly large investment reserve, the emergence and increase of which is made monthly due to the amount of depreciation of the main Free financial resources arise as a result of the inclusion of depreciation deductions in the cost of products. This reserve can be used to expand the non-current assets of the enterprise.
Securities, which are bonds and bills, as well as shares, are also sources of investment financing. The turnover of this cash equivalent is one of the sectors of the financial market. It significantly accelerates the probability of investing free funds of individuals and legal entities in the commercial and social sphere of the country.
Credits as sources of investment financing in their economic essence express the relations that arise in connection with the movement on the principle of compensation and repayment. The main component that regulates these links is Proceeding from practical examples, attracting this kind of investment occurs in those business sectors where they have the fastest effect in the form of profit.
A very promising method of investment is leasing, which is divided into operational and financial. Operations of the first type include relationships based on short-term and long-term leases. Standard equipment in this case, it can repeatedly move from one client to another. The relationship that arises in this case involves fixed rental payments, which is a sufficient condition for achieving full depreciation of production equipment, providing a fixed income.
Internal sources of investment are the organization's own funds, both financial and otherwise, used to finance and invest in its own production. In addition to cash, this can be real estate, transport, materials, skilled labor.
The amount of internal investment is determined by the difference between the total amount of funds of the enterprise and the amount of funds subject to mandatory storage on the organization's current account.
Consider internal sources of investment. On a national scale, the overall level of savings depends on the level of savings of the population, organizations and the government. Thus, the population can set aside certain funds for the future, companies can reinvest part of the profits received from their activities, and the government can accumulate funds by exceeding budget revenues over expenditures. At the same time, the volume of savings directly affects the volume of investments in the country, since part of the funds is directed to consumption, and the rest - to investments.
Based on this, the following main internal sources of investment can be distinguished:
1) profit.
Businesses and organizations often use profits as a source of investment. Part of the profits they receive is directed to business development, expansion of production and the introduction of new technologies. Obviously, those enterprises and organizations that do not allocate funds for these purposes eventually become uncompetitive.
Enterprises sometimes try to make up for the lack of financial resources, including for business development, by raising prices for their products. However, it should be borne in mind that an increase in prices for their products causes a reduction in demand for them, which leads to problems with the sale of products, and, as a result, to a decline in production.
2) bank loan.
Bank lending in many developed countries is one of the main sources of investment. At the same time, long-term lending plays a special role, since in this case the burden on the borrower is low and the company has time to “promote” the business. However, the role of bank lending as a source of investment depends on the development banking system and economic stability in the country. There is no doubt that the instability in the country leads to the reluctance of banks to issue long-term loans and finance investment projects.
In general, bank lending contributes to a gradual increase in production and, as a result, the overall recovery of the country's economy.
c) issue of securities.
The issue of securities is gradually becoming a source of investment in Russia. At the same time, in developed countries, it is the issue of securities that is one of the main sources of financing investment projects.
In order to raise funds, enterprises can issue both shares and bonds. At the same time, as a rule, any legal entities and individuals with free cash can act as buyers of securities. In this case, they act as investors, providing their own funds in exchange for the company's securities.
d) budget financing.
State investments are usually directed to the implementation of a limited number of regional programs, the creation of particularly effective structural facilities, the maintenance of federal infrastructure, etc. At the current stage of development of the economy of Kazakhstan, the priority areas in terms of budget financing are the stimulation of industrial development and the maintenance of scientific and production potential.
e) depreciation charges.
Depreciation deductions are aimed at restoring the means of production that wear out in the process of being used in the production of goods. However, depreciation deductions are currently depreciating in the Republic of Kazakhstan due to inflation, which significantly reduces their role as sources of investment.
External sources of investment
External sources of investment are funds raised from private investors, by issuing securities of the organization, and these are borrowed funds aimed at developing production.
Also, state injections, sponsors' funds and other receipts can act as a source of external financing.
External sources of investment are
· Direct foreign investments
- Portfolio foreign investment
- This is an investment in the company's securities
- · Foreign loans
I. Issue of shares. Shares are equity securities that represent a direct share of their owner in real property and make him a co-owner of this property. Shares can be:
- * ordinary, giving the right to their owners to participate in voting at the meeting of shareholders; payment of dividends on them is carried out after the accrual and payment of certain funds to the owners of preferred shares;
- * preferred shares are those that do not give shareholders the right to participate in voting, but give their owners a pre-emptive right to dividends, which, according to Russian law, are paid either in a fixed amount or in a free amount established by the board of the joint-stock company, but not lower than the dividend on ordinary shares.
An increase in equity capital by issuing shares is possible when the company is transformed into a joint-stock company or when a joint-stock company issues new shares.
The placement of shares allows you to raise capital in large volumes and for a long time. The borrowed funds are paid to their owners only upon liquidation of the joint-stock company. When financing large investment projects, the issue of shares allows you to postpone the payment of funds for the period when the projects themselves generate income.
The issue and placement of shares are associated with high costs. In addition, there is a risk of loss of a controlling stake or the takeover of a joint-stock company by another company.
II. Issue of bonds. A bond is a debt security. It expresses the obligation of the issuer to pay the amount of debt and interest payments on the security on time.
The issue of bonds is aimed at attracting temporarily free funds from the population and commercial structures.
Bonds can be secured or unsecured. Secured bonds (mortgage bonds) are distinguished by the obligation of guaranteed payment by providing collateral in the form of movable or immovable property (assets). Pledges are primary, secondary, tertiary. This means that the same property can serve as a guarantor for different loan obligations. Bonds with primary pledge have an advantage.
Unsecured (unsecured) bonds are issued by companies with a high business reputation. Their security is the high solvency of the company.
The duration of the bond loan should not be less than the average period of the investment project, so that the repayment of obligations under the bonds occurs after receiving a return on investment.
Bonds require costs for their issue and placement. In a crisis situation for the issuer, their placement may lead to insolvency and bankruptcy.
III. Raising capital through the credit market. Economic interest in the use of credit is associated with the effect of financial leverage. Leveraged business can increase profitability own funds depending on their ratio of borrowed and the cost of the latter.
An investment loan is a type of bank loan aimed at investment purposes. Credit must be secured. The main types of collateral are:
- * pledge;
- * guarantee;
- * guarantees;
- * other types of loan repayment.
The loan allows you to immediately start the implementation of the project. This means postponing the payment of the amount of debt and interest over time periods. The source of repayment of the loan and payment of interest should be the profit from the investment event being financed.
Collateral - some security transferred by the customer to the lender as a guarantee of repayment of the loan. In order to secure the repayment of loans, banks often oblige their customers to place at their disposal legal claims to the right to own real estate, corporate stocks, savings deposits, insurance policies, and cars and other durables that were purchased by the borrower in the period between taking loan and the time of its repayment. If the borrower does not repay the loan within the specified period, the bank has the right to sell this collateral to compensate for it. If the borrower offers some kind of collateral to obtain a loan as security (or guarantee), then such a loan is called secured, or guaranteed.
IV. State funding. State financing is carried out within the framework of state programs to support entrepreneurship.
Types of state financing of investments:
- * when financed by providing grants and subsidies, funds are usually allocated under specific project free of charge;
- * equity participation of the state assumes that it acts as an equity investor, the rest of the necessary investment investments are made by commercial structures;
- * direct (targeted) loans are provided to a specific enterprise or for a specific investment project on a preferential basis; the state establishes the amount of interest rates, the term and procedure for repaying the loan;
- * when providing guarantees for loans, the organization receives a commercial loan, and the government acts as a guarantor of its return, paying the loan amount in case of default by the organization.
V. Additional contributions. Investment contributions are an investment in the development of an enterprise as a contribution from which the investor receives interest income.
VI. Foreign investment. Attracting foreign investment in the domestic economy as a source of financing for investment activities faces a number of problems due to the low investment rating of the country and most of its regions. However, attracting foreign investment is necessary because it should contribute to solving the following socio-economic problems:
- * development of the unclaimed scientific and technical potential of the Republic of Kazakhstan, especially at convertible enterprises of the military-industrial complex;
- * promotion of Kazakhstani goods and technologies to the foreign market;
- * promoting the expansion and diversification of export potential and the development of import-substituting industries in certain industries;
- * facilitating the inflow of capital into labor-surplus regions and areas with wealthy natural resources to accelerate their development;
- * Creation of new jobs and development of advanced forms of organization of production;
- * experience of civilized relations in the field of entrepreneurship;
- * Assistance in the development of industrial infrastructure.
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For dynamic growth and successful business development, reliable and stable investment sources .
At the macro level investment sources are large foreign and Russian companies, private investors and state institutions.
At the micro level investment sources may be financial resources obtained from the sale of securities, internal resources of the organization (net of all costs), attracted venture capital investments, borrowed funds in the form of loans, loans or debt securities.
It should be said that the main source of investment has always been the company's net profit, that is, its own funds.
Main sources of investment
Own sources of investment
Own sources of investment are all assets of the company that are its property and participate in its investment activities.
Own sources of investment are
- net profit of the organization
- authorized capital
- depreciation deductions
- reserves of the organization (financial, economic)
- funds received from insurance companies upon the occurrence of an insured event
- funds received free of charge. Sponsor help.
Borrowed sources of investment
Borrowed sources of investment are funds raised by the organization on a return basis.
The conditions for the return of borrowed funds are agreed in advance, namely, the repayment period, and the percentage that must be paid.
Entities that provide assets on such terms, as a rule, do not participate in the distribution of profits.
State source of investment
To attract public investment, companies should take part in various projects and programs organized by the government Russian Federation or municipal and other levels of government.
This kind of participation gives a chance to get
- activity grant
- issuing a loan on favorable terms
- transfer for use of premises, machinery, equipment.
Source of investment- private investors.
How can a company raise private funds?
To attract additional funds, many companies issue securities.
All securities issued by an entity may be bought or acquired by both individuals and legal entities i.e. potential investors. The proceeds from the sale become the financial assets of the company.
Which source of investment will be used by the company is always determined by its investment policy.
The investment policy, in turn, is drawn up by the company's management, as well as financial analysts and experts.
Internal and external sources of investment
Internal sources of investment - These are the organization's own funds, both financial and otherwise, used to finance and invest in its own production. In addition to cash, this can be real estate, transport, materials, skilled labor.
The amount of internal investment is determined by the difference between the total amount of funds of the enterprise and the amount of funds subject to mandatory storage on the organization's current account.
External sources of investment - this includes funds raised from private investors, by issuing securities of the organization, and borrowed funds aimed at developing production.
Also, state injections, sponsors' funds and other receipts can act as a source of external financing.
Internal sources of investment
Internal sources of investment are
- organization profit
Each organization must spend a portion of its profits on developing and maintaining the competitiveness of its own business. - budget financing
- credits and loans
Such a source of investment as a loan is one of the main and most common and convenient ways to raise funds for the development of one's own production. The most relevant is long-term lending, because. is the most profitable and painless financially. - depreciation deductions
Depreciation deductions are aimed at repairing and restoring the means of production during operation. - issue of securities of the organization
The company issues a certain number of securities on the financial market, with the aim of selling them to private investors and attracting additional funds through this.
External sources of investment
External sources of investment are
- Direct foreign investments
Such investments are considered to be investments in the operating assets of the organization. Provided that the investor owns at least 25 percent of the company's shares and participates in its management. - Portfolio foreign investment
This is an investment in the company's securities - Foreign loans
Economic evaluation of investments
(Pomogaeva Irina Yurievna)
Lecture 1
Theoretical basis investments and sources of their financing
Basic concepts, classification and types of investments. Investment activity of the enterprise. Sources of investment financing. Normative-legal support of investments.
Investment means temporary abandonment of the subject's existing resources and the use of these resources to increase their well-being in the future; investing capital in something to increase income as a result. A necessary link in the process is the replacement of worn out fixed assets with new ones, however, the expansion of production can only be carried out through new investments aimed at creating not only new production capacities, but also at improving old equipment or technology. This is what makes the economic sense of investment.
There are the following types of investments:
· Intellectual - aimed at the training and retraining of specialists in courses, the transfer of experience, obtaining licenses, innovations.
Capital-forming - aimed at increasing production and non-production non-financial assets (costs for major repairs, acquisition of land, etc.)
Portfolio - investments invested in long-term securities, shares, but not giving investors the right to influence the work of firms and companies, constituting at least 10 percent in the total share capital of firms, as well as invested in bonds, bills and other debt securities of own and loan capital.
Direct - made by legal and individuals who have the right to participate in the management of the enterprise and fully own the enterprise or control at least 10% of the shares or share capital of the enterprise.
· Real - long-term investments in the sector of material production.
· Financial - debt obligations of the state.
Investments are classified according to the following criteria:
For investment items:
real
financial
By investment period:
short-term (up to a year)
mid-term (1-3 years)
long-term (3 or more)
For the purpose of investment:
portal
In terms of investments:
production
non-production
By forms of ownership of investment resources
private (non-state) - these are investments of citizens and enterprises of non-state form of ownership
state
foreign
mixed
By region:
· inside the country
· abroad
By risk:
aggressive - characterized by a high degree of risk, high profits and low liquidity
moderate - characterized by an average (moderate) degree of risk with sufficient profit and liquidity of investments
Conservative - are low-risk investments, are reliable and liquid
Investment activity of the enterprise
Investments occupy a central place in the economic process and predetermine the overall growth of the enterprise's economy. As a result of investment, production volumes increase, income grows, develops and moves forward in the economic rivalry of industries and enterprises that satisfy the demand for certain goods and services to the greatest extent. The income received is partially accumulated again and increased, while there is a further expansion of production.
Main Features investment activities are:
Irreversibility associated with a temporary loss of liquidity
Expectation of an increase in the initial level of well-being of the enterprise
Uncertainty associated with attributing the result to a relatively long-term perspective
To stabilize the economy and improve investment climate it is necessary to take a number of cardinal measures aimed at creating general and specific conditions for the development of market relations and attracting investment.
As priority measures the following can be distinguished:
· Achieving agreement between different structures of power (between the judiciary and the executive).
Strengthening the fight against crime.
· Reducing the rate of inflation by all measures, with the exception of non-payment of wages to workers.
· Revision of tax legislation in the direction of its simplification and stimulation of production.
· Accumulation of free funds of the population and enterprises as investments by increasing interest rates on deposits and deposits.
· Implementation in the construction industry of the system of payment for objects after the completion of their construction.
· Provision of tax incentives to banks, investors engaged in long-term investment in order to fully compensate for their losses from the slow turnover of capital compared to other areas of their activities.
Investment financing sources
The organization of financing is one of the most important problems of investment activity. The formation of investment resources is the main condition for the implementation of the investment process.
Sources of investment financing can be funds that are used as investment resources.
The composition and structure of funding sources depend on the economic mechanism in place in society. According to the method of attraction in relation to the subject of investment activity, investment resources are allocated, attracted from internal and external sources.
There are external and internal sources of financing at the micro and macro levels. At the macroeconomic level to domestic sources investments include:
state budget financing
savings of the population
· savings of enterprises, commercial banks, investment funds, insurance companies, etc.
To external sources funding include:
foreign investment
Foreign credits and loans
On the microeconomic level to domestic sources include own funds of the enterprise, formed to ensure its development. The basis of the enterprise's own funds is the capitalized part of the net profit, the investments of the owners of the enterprise.
According to the title of ownership, investment resources are divided into 2 types: own and borrowed. Own sources of investment - this is the total value of the enterprise's funds, owned by it and providing its investment activities. To own sources investment financing includes:
· authorized capital
· profit
· depreciation deductions
· on-farm reserves, etc.