Investment as a source of financing of productive assets

Investment - is the cost of production and accumulation of the means of production and an increase in inventories. In order to make intelligent decisions about buying equipment or building a new stage of the plant, the firm must compare past and current costs and planned costs of a possible return on investment. Different companies, factories, firms in the same investment in the production of income have different values ​​and different levels of profitability - the rate of return on invested capital that is the same fixed investment can yield different results. In this context, great importance is the economic justification of the project that is, comparing the cost of investment and the potential return on investment.

Investment is an important economic instrument. Without investment there is not a business process or movement of capital. Investments alone are not an end in themselves, they are means to obtain return on investment. Investments should certainly pay off with profits, and, most profit - that is the law of economic activity, that is, investment should be cost effective. Investing should be well designed, well-designed. And to become a reality, it is necessary to calculate the timing and degree of return on investment. In calculating the timing and extent of return on investment the main obstacle is the growth factor prices, including for fixed capital. For the calculation of the specific investment is important to make a specific assessment of the investment climate, taking into account with many conditions, such as inflation, taxation, the presence of competitors, monopolists, the quality of the labor market, the political situation.

To finance investment firms or use their profits, or turn to the market for money-capital loans. Most businesses to finance investment borrow money in the bank. The use of borrowed money capital they pay interest on loans.

Loan interest is a charge for the use of money capital, in other words, it is the price of money capital.

Rate (rate) is calculated as the percent ratio of debt to the value of money capital of borrowing, expressed as a percentage.

Percent as economic category-creditor money and the recipient of these funds. Such relationships involve not only the transfer of one person to another of money, but the conditions for their receipt. In theory, the important issue is that of the source percent. What is the origin of this form of income? On this question the economic theory gives a different answer. There are several theoretical approaches to explain the sources of interest.

The main approaches are the following:

- Marxist approach, which is based on the theory of surplus value;

- Treatment of interest in the theory of net productivity of capital;

- A psychological approach to the concept of interest as a component part of the theory of marginal utility.

Theme 8. Costs and revenues of the enterprise (company)