Investments in fixed capital: types and sources
Before you get acquainted with what constitutes an investment in fixed capital, it is worth considering both concepts separately. This will help to understand them in more detail and avoid mistakes in the future.
The concept of investment and fixed capital
Investments are long-term capital investments in the objects of various types of activities to generate income in the future.
The main capital is the property of enterprises, which is expressed in monetary terms. To it can be attributed the material values of the organization, as well as financial and intangible assets.
The concept of investment in fixed assets
Investments in fixed assets are investments that will contribute to the acquisition, creation, and expansion of the fixed assets of an enterprise. The result of this process may be the construction of new facilities and equipment upgrades, the purchase of necessary vehicles and tools.In addition, other actions are carried out aimed at the development of a particular subject of the economy.
To date, such investments occupy a predominant part of the total number of investments of each organization. It is worth noting that the volume of investments in fixed assets is variable. This indicator can change quite often depending on the needs of the enterprise.
Types of investment considered
Considering the areas of financial investment, there are the following types of investments:
- forestry and hunting;
- fish farming;
- area of restaurant and hotel business;
- communications and transportation;
- repair of equipment and household products;
- trade and rental properties;
- health protection;
- public administration;
- financial activities;
- the provision of individual and public services;
- culture and sport.
Investments in fixed capital are consistently traced in these areas of activity. It should be borne in mind that their indicators vary depending on the effectiveness.You must familiarize yourself with the conditions that are relevant for ensuring its sufficient level.
Factors that affect investment performance
Various factors influence the indicators of investments in fixed assets, which affects the functioning of the enterprise. At the national level they can be:
- the feasibility of the economic policy that is conducted in the country;
- social situation in the country;
- indicators of excellence in taxation systems;
- the presence and nature of investment risks in a particular state for capital investors;
- conditions that are created to attract capital from abroad.
It is necessary to take into account the condition: financing of investments in fixed capital may decrease, which will be the result of insufficient efficiency of investment policy in the state. One of the main factors that may appear on this is the degree of inflation in the country.
When considering individual regions of the state and certain enterprises, the volume of investments may be affected by:
- the level of use of production fixed assets and capacity;
- competitiveness of distributed products;
- the quality and effectiveness of investment projects implemented by organizations;
- rationality in the management of enterprise resources.
Given these factors, you can increase the amount of investment in fixed assets.
Sources of fixed capital contributions
Sharing the factors that influence the investment in fixed assets, the company accounts for the accounting record. It is worth noting that the sources of financial flows are funds owned by the company, software products, trademarks, patents, as well as assets of land funds.
Investments in fixed assets can also come from attracted assets through the issuance of shares of the company. They have a special influence on the structure of investments. It should also be borne in mind that cash contributions can be allocated by groups of the industrial-stock type, as well as joint-stock companies and holding companies. Such investments are made on the basis of a non-returnable principle, and it is them that can be called one of the most effective sources of economic development of organizations and the economy as a whole.
What is needed to attract investment?
No one will be engaged in charity and invest in activities, without having benefits. For this reason, a special investment agreement is drawn up, which specifies the object, the obligations of both parties, their responsibility and terms. Based on it, the investor gets the right to his share of the profits.
In such a partnership, the risk exists only for the investor, because he cannot be completely sure of the profitability of business activities. Moreover, if the company does not receive income, it will not have to pay anything to the investor.
Without special reasons, investors will not make deposits either. To attract funds, you need to make a competent business plan. It should display and justify the profitability of investments. It is required to pre-consider the conditions under which the company agrees to invest. In addition, it is worth considering the details that are present in this process. Otherwise, the entrepreneur may be in an uncertain situation.
Investments in fixed assets are easy to attract, and besides this is a beneficial interaction for both parties to the transaction. For this reason, it is also easy to find an investor for a truly profitable business.