For what purpose is investment capital created? Investment capital and investment potential of the enterprise. Deferred tax assets and liabilities
The development of a market economy is impossible without attracting investment. Effectively reallocating temporarily idle capital to those sectors that need it most is one of the most important functions of the capital market.
Capital market investment and interest rate - these terms have appeared in our vocabulary quite recently. Along with this came the realization that money is not just a means of payment, but also a commodity. If you sell it profitably, you can earn income.
With the transition to a market economy, business entities faced the acute issue of attracting resources for further development and modernization. Bank loans could not fully satisfy capital needs. This is how it appeared, which ensured the migration of capital and allowed investors to invest temporarily free funds to make a profit.
Today, the securities market is a clear, well-coordinated mechanism that has all the characteristics of a market. Its main indicator is capital investment and its types.
The following companies operate in the market:
- issuers;
- investors;
- financial intermediaries.
The capital market, investment and interest rates, as well as the entire financial market, are subject to constant control and regulation by the state. This is necessary to create optimal conditions for the development of the capital market and protect the interests of its participants. But you should not abuse administrative resources, as this may scare off investors.
Investment capital
Investment capital is funds that investors invest in financial instruments in order to make a profit. Funds in the form of money become investment capital when they are used in production - for the purchase of equipment, labor and other elements of labor.
The amount of investment capital is equal to the sum:
- own resources;
- borrowed resources.
Own resources include the assets of the enterprise, such as profit, depreciation, and so on. As for borrowed funds, they are paid, that is, they reduce the investor’s income. Therefore, the features of determining the amount of invested capital, or rather the most important of them, is the optimization of its size.
The bulk of investments consists of savings. They represent surpluses that arise when there is a positive difference between income and expenses. Savings become investment capital when they are used directly or indirectly to purchase something.
For the effective development of the economy, it is important that the state fulfills its function - creating comfortable conditions for the functioning of the capital market. To achieve this, a suitable regulatory framework is required.
Investors are very sensitive to various kinds of challenges and risks, therefore, when an economic, political or other crisis occurs in a state, one can observe an outflow of capital from the country.
Sources and consumers of investment capital
The main suppliers of capital for investment are the population. Their savings are significant and are accumulated in the form of bank deposits, pensions, insurance contributions, and so on.
The state’s task is to create an atmosphere within the country in which the population can not only accumulate funds, but also redirect them to real sectors of the economy in the form of investments. In developed countries, the phenomenon of investing capital on an equity basis is common.
People also trust their money to financial institutions and, despite the low percentage of income, invest their savings for the long term, entrusting their management to funds, banks and investment companies (see).
The largest consumers of investment capital are business and the state itself. They raise capital for the development of various projects, modernization and expansion of production by issuing debt securities.
Such financial instruments are sold on the securities market, thereby ensuring the transfer of capital from the investor to the issuer.
Investment capital management
Own and borrowed capital must be invested correctly. The investor’s task is not only to generate a certain amount of resources, but also to manage them correctly.
The main purpose of such activity is to generate income. But at the same time, investing capital in assets is associated with risks. There is a relationship between the amount of risk and the income that can be obtained from investing in a particular project.
The skill of an investor lies in correctly assessing risks and choosing the “golden mean” between their magnitude and the size of the expected profit. Special indicators are used to assess risk. There are quite a lot of them, investors use them at their own discretion, depending on the investment object, the political and economic situation, and so on.
When calculating indicators, various methods are used:
- expert assessments;
- analogies;
- appropriateness of costs;
- stability checks.
These methods help the investor assess the degree of risk, identify factors that may affect its magnitude and develop measures to reduce risk (investing capital in diversification, insurance, preparing reserves, and so on).
An investor assesses the degree of risk of investing capital over a certain period of time. But there are factors that may affect the performance of investments in the future. They also need to be taken into account. To do this, special calculations are used, for example, calculating the discount rate for invested capital.
Selecting an investment object
But the formation of an investment portfolio begins not with assessing risks, but with choosing an object in which to invest. The investment object must be a reliable, stable and profitable project. Analysts are often brought in at this stage.
The analysis begins with a study of the country, the political situation, the state of the economy and basic financial indicators. Next, promising directions and prospects are identified.
These could be projects that have government support, sectors of the economy focused on the production of material goods, the demand for which is growing, and so on. At the final stage, companies are analyzed, business reputation is checked, reporting, founders, income structure, liabilities, and so on are studied.
A rating that is considered reliable shows that this type of investment is quite popular. This is explained by the high reliability of investments, since the value of real estate does not change significantly, it always remains liquid and, as practice shows, such an investment object becomes more expensive over time.
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Investing in bonds and other securities is aimed at generating income. When issuing, the conditions for the turnover of the security are indicated, such as the period, coupon size, and so on.
And investing capital in stocks is not only aimed at generating income. The purchase of such financial instruments gives their owner the right to participate in the management of the company.
Other popular investment objects include:
- cash deposits;
- intellectual property;
- property rights;
- scientific and technical developments.
Investment capital is a certain amount of resources that are invested in the economy, in the purchase of tangible or intangible goods in order to make a profit. Investment capital can consist of your own or borrowed funds, it is important to manage them correctly - choose an investment object, assess the risks. After this, you can expect to make a profit in the future.
Capital - what it is and why create it. The article will tell you how to accumulate capital and explain why it is important to save money. Will provide an understanding of the principles of investing. The first in a series of articles on how to create and increase capital.
What is capital?
Capital is the goose that lays the golden eggs. In other words, capital is the money supply that is stored in a financial instrument and earns interest on capital. The interest received from the capital is your income, which you use at your discretion.
Every person at least once in his life thought that having capital is great.
Few people save and create capital; few managed to create capital by saving part of their earnings. Why is this so?
Why are so few people creating capital?
Because this requires discipline. Just like in sports or in studies, to achieve results you need to repeat the same exercises for a long time or memorize the material in order to master it. Likewise, in creating capital, you need to regularly replenish your “money tank” for 15-25 years in order to fill it to the top.
As a result, when the “tank is full,” capital will be created and you need to skillfully manage it in order to receive a lifetime annuity in the form of interest on capital.
Why create capital?
With the definition of what capital is figured out, let's look at what it is needed for. People have different goals, I will list the main ones:
- Create a hereditary mass;
- Buy property;
- Buy housing for children;
- Create all kinds of trust funds.
Having a large amount of money at your disposal will help you realize your most important life plans. If you agree with the goals of creating wealth, let's look at what you need to do to create capital.
What to do to create capital.
Determine and be sure that for the next 15-25 years you will earn money and save some of it, and then invest.
Of course, this is not so easy to do - make a promise to yourself to earn money for 25 years, and then save it.
But if you “look back”, you will see that you have been earning money for 10-25 years and life is going on as usual. This should help you realize that in the future you can do everything.
It’s worse not to put anything off and end up with nothing at the end of your life.
To create capital, determine the amount you would like to save. It's easy to do. Subtract expenses from income and get the amount you will save monthly, let’s say it’s $200.
There is no need to live from hand to mouth and deny yourself everything. This issue must be approached without fanaticism. You can save $200 - that’s great!
Or calculate the amount you would like to receive in your golden years. This is very easy to do using a lifetime annuity calculation. Based on the amount you want to receive monthly after finishing your career, you will receive the amount you need to save from today.
Next, we select an investment instrument with which we will invest our savings. You can choose on your own or seek help from a financial advisor. As practice shows, people even with earnings of $3000-5000/month. at a minimum, they invest money in a bank for a deposit in Russia, at most they buy bonds or mutual funds, also in Russia.
But this is not the entire list of investment instruments; below I will briefly talk about the more common ones.
Investment options in Russia.
Today there are many investment options in Russia, we list some of them:
- Individual investment account;
- Real estate;
- Deposit;
- Russian broker;
- Foreign broker;
- Insurance company (unit-linked contracts).
I will briefly describe the tools mentioned above and how they work.
Individual investment account – (hereinafter referred to as IIS) works simply, you invest 1 million rubles per year for a maximum of 3 years. Next, you buy securities. Then hold or trade for 3 years. After 3 years have passed you will receive:
- Invested capital;
- income from securities;
- Tax deduction of your choice;
a) 13% refund of the contribution amount for 3 years, but not more than 52,000 rubles. in year
b) 13% return on investment income.
The main advantage of the IIS is tax benefits. If you need tax benefits, then an IIS is suitable; if you want to invest to earn a profit, then this instrument is unlikely to be suitable for investment.
An interesting alternative to deposits, but in my opinion there is too much paperwork, and the profitability is not very high, for example, if you choose a return of 13% of the contribution amount for 3 years, then the maximum you can earn is 52,000 rubles. per year + possible investment income ~ 80,000 rub. Suitable for depositing money for a short period of time, saving against inflation, nothing more.
Real estate – we all just take money and buy a piece of real estate, which we will then either rent out, resell at a higher price, or hold for some time until certain circumstances arise (for example, the opening of a metro station next to the house in which you have an apartment for rent). rent) will not affect the increase in the price of the property.
Deposit – it’s difficult to call an investment instrument, but as practice shows, people in Russia quickly take their savings to the bank. A deposit is an instrument that works as follows. You enter into an agreement with the bank and deposit money into your account. The bank specifies in the agreement the conditions under which it takes money from you:
- Term.
- Sum.
- Rules for withdrawal and replenishment of funds.
- Interest rate.
After which the bank manages the money at its own discretion, and within the period specified in the contract, returns the money and income in the form of interest.
The downside to using a deposit is that it will not fulfill the main function of investing – earning a profit. At the time of writing, deposits in Russia provide returns either at the inflation level or 1-1.5% higher. Therefore, if you are going to create capital, then a deposit is not suitable for this.
Russian broker – There are many brokers in Russia, but they work in approximately the same way. A broker is essentially a platform that provides access to the stock market under specific conditions. You open a brokerage account and deposit money. Next, you perform transactions on the stock market - buy, sell and earn profit. After which you file a tax return annually and pay income tax.
You can also choose a broker and put money under management, i.e. You don’t have to trade securities yourself; a professional manager will do it for you. The entry threshold in this case will be 250,000 for ruble products and $10,000 for foreign currency ones.
Foreign broker – a foreign platform, everything is the same as with a Russian broker, only some requirements are added:
- knowledge of the language to carry out transactions with securities,
- be an experienced investor.
- certificate of auditor of the Federal Financial Markets Service, CFA.
- At least 2 years of work experience in the Russian Federation or a foreign company.
- in the account or in securities of at least 6 million rubles.
This investment method is suitable for those who actively trade in the stock market - 4-5 transactions per month, since passive behavior can result in a fine.
Insurance company (unit-linked contracts) – English method of investment. You open a contract and deposit money, select the composition of assets that you want to have within the investment portfolio and determine the shares.
For example, select assets:
- US government bonds;
- Shares of global companies;
- Other alternative assets (gold).
- Bonds – 30%;
- Shares – 50%;
- Alternative assets – 20%.
As with brokers, in this case the company is also a platform where you are given access to the global stock market. You determine the assets in the portfolio and their shares, and the company purchases shares in the funds for you - units.
Having thus balanced your investment portfolio and determined your investment strategy, you begin investing in the global stock market.
Let's summarize some investment instruments that can be used to create capital:
Why not a deposit and not income from renting out an apartment.
Think for yourself and compare the obvious things.
The yield on a foreign currency deposit in Russia is ~ 3% per annum.
The yield from renting out an apartment is ~ 3-5% per annum in rubles.
This is very little! Such returns either cover inflation or bring absolutely nothing into your pocket.
Income from investing in the global stock market will bring you approximately 2.5 to 11% per annum in foreign currency, which is much more profitable, which means you will earn more.
Keeping money on deposits and making money simply won’t work, because inflation “eats” all the accumulated interest.
And in order to create capital and earn money, the return on financial instruments must be greater than the inflation rate.
Which tool should you ultimately choose?
If you need to solve long-term financial problems and earn profit, then your investment portfolio should have a large share of stocks.
In this case, you need a tool that will help you achieve your financial goals with minimal costs, time and resources.
Also, Russia is a developing country and investing only in the Russian stock market will not provide the necessary profit and will be more risky.
To distribute risks, it is necessary to invest part of the capital outside Russia, and a unit-linked contract will help with this better than all the tools listed above.
With help, you will legally gain access to investments in foreign countries and this will increase your chances of earning a profit, and will also significantly reduce risks.
What happens if you don’t create the right amount of capital?
Imagine Niagara Falls, here it is.
You are sailing far and there are no signs of trouble, but as soon as you find yourself close to the cliff, you will not be able to do anything and will fall into the abyss.
So it is with the creation of capital. Time passes slowly and there are no signs of trouble, but by shelving the creation of capital, you are getting closer to the abyss and the closer you are, the less chance you have of saving yourself.
Today we looked at why a person needs capital and what financial instruments can be used to create it. We came to the conclusion that in order to earn profits and reduce risks, you need to invest not only in Russia, but also abroad.
A unit-linked contract is the optimal tool for long-term savings with minimal costs, and in this article we will talk about this, in which I will tell you what unit-linked contracts are and how they work.
Friends, in order not to fall into the abyss of Niagara Falls and to create the required amount of capital in a timely manner, I ask you to sign up for a consultation. And in no time you will get a good savings plan.
See you!
Sincerely,
Financial Consultant.
Capital investment. Where to start?
This article is intended for novice investors who do not yet have knowledge in investments and sufficient capital of their own to begin full-fledged investing. I was prompted to write this article by my own “bitter” experience of losing significant funds at the beginning of my investment activities, as a result of which I almost lost faith in my abilities and capabilities in investing money.
Many people ask questions: ? Why is it necessary to invest? Where can I get money for investment? What to invest in?
Let's try to understand each of these issues in more detail.
What is investment?
Capital Investment
Capital Investment
This is an investment of capital with the aim of making a profit. Capital itself may already be the result of investment. The definition of investment is given in my article.
Why is it necessary to invest?
This question worries those who are wondering today how they will live in the future, how they will be able to live in retirement, with state pension payments of several thousand rubles. This issue does not bother the majority of our fellow countrymen from Russia and other countries of the post-Soviet space, because... many believe that the state and relatives will take care of their maintenance in old age. I think that the assertion that the state will provide full support for its pensioners is groundless. Just look at our pensioners at the present time, I think everyone has parents, grandparents, ask them how they live on this pension and what they can afford. The second statement, that their children will support them in retirement, is also not entirely correct. Your children will also want to develop in life, and having such a burden as you, it will be quite difficult to do this. So, I wouldn’t want to wish my children to support me in my old age. Let's look at another point: did you want to become completely independent from your employer, did you want to have the opportunity to not work at all or to work only when you want it? If yes, then you can continue reading this article; if not, then further reading is pointless for you. Many of us dream of making significant purchases in our lives, for example: an apartment, a car, a cottage or a house abroad. To solve such a problem, we, as a rule, save money, then take out a loan or mortgage for the missing amount, and then we drive ourselves into debt bondage, so that we can then worry about the possibility of losing our job, which allows us to service loans and borrowings. But rich people do the opposite: they first save money, take out loans to develop their personal business, invest the profits in further business development and investments, and only then begin consumption and consume only part of their income, when the main profit continues to go into investment and business.
Where can I get money for investment?
The sources of cash flows into investments are quite diverse.
I can advise, firstly, not to take out loans for investments, secondly, not to invest all your money at once in one investment item, and thirdly, to constantly have a cash reserve for possible unforeseen investments, for example: in the event of a stock market crash and the opportunity to purchase profitable asset at low prices.
Let's look at options for accumulating capital for investment. To accumulate initial capital for future investments in various projects, I advise you to start with the most reliable investments, for example:. To do this, I suggest opening a bank deposit for a period of one year, with the possibility of replenishing it. To this deposit, transfer monthly funds from your income in the amount of at least 10% of your monthly income, the more, the better. Many of you will immediately say that they do not have the opportunity to save money, because... it is necessary to pay off loans and the remaining money goes to living costs, but few people even calculated and planned their income and expenses for at least a month, let alone a year. In order to be able to transfer money from your income to a savings bank deposit on a monthly basis, you must first calculate all your possible income and expenses, and this must be done on paper. This is not difficult to do, take a blank sheet of paper and divide it into four parts, call the left side income, the right side expenses. In the upper left column you will have permanent, regular income (for example: wages, additional social benefits, etc.). In the top right column there will be fixed costs (food, accommodation, shopping, vacation trips, etc.). In the lower left part you will enter the amount that you expect to deposit for further investments, and in the lower right part, the fixed costs associated with paying off debts and loans. Thus, your main goal is to first pay off existing loans and debts, so that the lower right column in your monthly report is empty, and the lower left column is constantly replenished. Twelve such reports must be made, i.e. collect the entire planned year. Analyze and write down on paper how much you need to spend on food weekly, make a rough list of products and evaluate them in supermarkets, then plan your monthly spending budget. My advice for purchasing food in large cities is to buy it once a week, in large stores that provide significant discounts, this way you can control your costs and constantly reduce them. Household purchases (clothing, appliances, etc.) also need to be planned and included in your report. Planning such purchases will allow you to purchase such goods according to my favorite principle: “Buy expensive goods at low prices,” because you already know what you need and you have time to find a product that is good in quality, but cheap in price. See article. So, when you finally take control of your expenses, you can consider where you can save, what expenses you can cut, and what you didn't need at all. According to statistics, 30% of all purchases that a person makes in stores were not needed at all, and he at least did not intend to make another 20% in the near future. By drawing up a plan for income and expenses, you can also think about additional income that you are able to create. Why do I advise investing money in bank deposits in the first year and accumulating money for future serious investments? This is necessary in order to decide on the types of future investments and study them in detail, as well as create the main investment - your knowledge base, so as not to lose all your money, and also to have a reserve of capital for unforeseen cases. Bank deposits will be useful to you in the future, because... It will be necessary to have a place to store cash reserves, which may be useful for a profitable investment. You can familiarize yourself with the procedure for choosing the type of bank deposits in my article “”.
And so, you have begun to form initial capital on a bank deposit; it is time to select the necessary investments and start studying them.
What to invest in?
Quite an interesting question. I have heard many people tell me that they have found a profitable investment, now they just need to take out a loan from the bank and they can immediately make a lot of money. When I asked where the information about this profitable investment came from, they answered that one of their friends advised them to do so. When I asked if they understood what they were going to invest their money in, they told me that they don’t need to understand, they just need to invest money and receive their income. Here is a vivid example of future cash losses, the first rule of the investor is invest only in what you understand and understand.
Before you start choosing an investment product, I suggest that you familiarize yourself in detail with each of them and, first of all, familiarize yourself with the general concepts of Capital Investment. In the “” section of my website, you can familiarize yourself with the most common types of investments and begin to study each of them separately. I advise you to study in detail all these types not only on my blog, but also by reading the relevant literature. As far as possible, I will post literature in the “” section of the site, but you yourself will look for books and other sources on types of investments. The main thing when choosing certain types and sources of investment is not to succumb to random recommendations for investing money in investments that are unknown and unstudied by you personally. Before you start investing, you must determine the amount you want to invest in a particular source. This amount should not exceed 30% of the total amount you have determined to invest. If you are going to invest in shares of Companies, then you need to determine the target purchase price of shares at which you will start purchasing them, and also calculate the possible return on these shares, and the main return on shares should be from dividends paid regularly, and not from growth " body" of the asset, i.e. share price. As I like to say: “It’s better to have a dead goose that lays golden eggs than a huge broiler that hatches peas.” I will go into more detail on this in my future articles. If you are planning to invest in, then you need to study the broker with whom you plan to work, as well as the traders or investment programs to whom you will entrust the management of your funds. I advise you to create only if you fully understand the direction you have chosen and have extensive experience, for example: you have worked in this field for hire. In this case, you need to prepare a detailed business plan for creating, in which you need to take into account everything you need in the event of positive and negative developments. Do not set yourself short-term investment plans with the goal, for example: to earn money for a car or a trip abroad, these are just intermediate goals that will come to you later. Set yourself a goal, first of all, to become a financially independent and wealthy person, and the rest of the goals will come on their own. Your main goal for the first five years is to direct your main income, and for now this can only be money from wages, to investments, and to produce personal consumption with the income received from investments. Thus, at first you will teach yourself to consume only from additional income from investments, and to invest the money earned by personal labor into investments. Subsequently, these methods will allow you to become independent from your salary, because... The main consumption will come from the income generated by your investments. The transition to consumption from the income received from investments must be made gradually, not forgetting to constantly increase the monetary base from the freed-up funds of your main source of income (wages) to increase capital for investment.
I have given you the basic criteria for starting preparation for Capital Investment, preparing the most important investment in life - experience, as well as forming initial monetary capital. Good luck in your investing endeavors and look forward to my future articles on investing.
The main condition for market development is to attract investment and redistribute capital to segments that are especially in need of financing.
To carry out commercial activities and make a profit, economic entities create investment capital. Its presence is an opportunity to achieve certain business results through proper investment of funds.
Sources of investment capital formation
Investment activity involves investing funds necessary to obtain profit in tangible and intangible form. When forming investment capital, both the subject’s own funds and borrowed money are used. The source of free capital is: enterprise profit, depreciation charges, funds received from the sale of securities and other sources of financing.As for the sources of borrowed funds, these are most often financial organizations that issue development loans. Not all available funds can be considered investment capital, but only those that were invested in assets and aimed at achieving a certain economic effect (making a profit). Money can be invested both in the real assets of the enterprise (in production) and in financial instruments (deposits, securities).
As practice shows, the main investor for the implementation of business projects and government programs is the population of the country. Despite the insignificant profits, people invest their free funds in bank deposits and buy shares of enterprises and organizations. By entrusting money to banks and investment companies, people take risks, so the state’s task is to ensure the safety of investors’ funds and guarantee that they receive their share of the profits.
How to choose the right investment object
Investing free funds is a certain danger, and the higher the expected return, the more risk investors have to take. In this case, it is important to choose the “golden mean” and not succumb to the temptation of making excess profits. The profitability of an investment project is checked in different ways, and it is necessary to take into account not only the characteristic features of the investment object, but also the socio-economic situation in the country. In some cases, temporary and seasonal factors are taken into account.Experts say that a future investor should start not with assessing risks, but with searching for a worthy investment object. This must be a stable and profitable project. It is at this stage that difficulties arise, and analysts who understand investment issues often come to the rescue, although the information received from them cannot always be trusted. The first step is to check the business itself and its prospects, after which you can move on to checking the company’s business reputation, the presence of debt obligations and the structure of income generation.
Formulas used to calculate investments
The formula for calculating investments looks like the sum of depreciation funds, retained earnings and loans received. For its part, depreciation funds are the difference between the total amount of depreciation deductions, the amount of deductions used and the amount of free depreciation funds (including issued loans). The actual amount of retained earnings is the difference between the total amount of retained earnings and the amount of distributed net income.The formula for calculating investments looks different if borrowed and equity funds were used simultaneously. In this case, the amount of the loan (with or without collateral) and funds borrowed from business partners are added to the result obtained by calculating using the first formula.
The issues of formation of investment capital and investment potential of enterprises from internal (own) and external sources of investment resources for the implementation of highly effective modernization and innovation investment projects are considered.
In this case, investments are understood as investments of capital in objects of economic activity (in particular, in enterprises) with the aim of increasing it (building up) in the future with a positive production and social effect of the long-term economic turnover of this capital.
It is argued that the investment strategy and tactics of the socio-economic development of an enterprise should be based on strict adherence to the principle of economic activity according to means and capabilities, within the framework of available investment capital and investment potential, without getting into exorbitant debts, with full use of all available production, productive and commercial resources.
The task of determining investment capital (investment resources, investment funds) and the investment potential of an enterprise usually arises when the idea of the need and feasibility of expansion, reconstruction and/or technical re-equipment (modernization and innovatization) of such an object appears and is developed and a comprehensive technical and economic study is prepared , financial and social justification of relevance, as well as a numerical assessment of the expected effectiveness, efficiency and profitability of the proposed investment project.
The investment capital of an enterprise can be its own, borrowed and total, i.e. the sum of the two previous elements. In the opinion of the author of this article, the total investment capital of an enterprise characterizes its investment potential at the actual level of use of its existing production, production and sales capabilities. The units of measurement of investment capital and investment potential of the enterprise and their elements are thousand rubles. or thousand conventional monetary units.
The amount of investment potential of an enterprise cannot be strictly determined; it is an indicative indicator, since the borrowed investment capital included in it, due to many objective and subjective circumstances, cannot be assessed with any precision and can vary within very wide limits.
There are internal and external sources of investment resources (investment capital and investment potential) of the enterprise.
There are only two obvious (traditional) internal sources of these resources - sources of own investment capital for any enterprise: accumulated depreciation charges and accumulated retained net profit, established at the time of calculating the amount of this capital.
The amount of accumulated depreciation charges and retained net profit is fixed from the moment the enterprise becomes the property of its last owner, if in the history of this business object there have been transitions from one owner to another (from one owner to another). In this case, it is necessary to take into account the historically verified accounting and economic facts of the expenditure of a part of the accrued depreciation funds for its intended purpose (current and major repairs, as well as partial renovation of the enterprise’s production fixed assets), and the amount of annually distributed net profit received in the years under review as a result of economic activities of this enterprise.
Thus, to determine the actual amount of accumulated and remaining accounting depreciation charges at the enterprise for the period of calendar time under consideration (the period of operation of the enterprise by the last owner) - Ano, the following expression is used:
Ano = Anp - Apn - Abp, (1)
where Anp is the total amount of depreciation charges at the enterprise for the period of calendar time under consideration;
APN - the amount of depreciation charges used at the enterprise for its intended purpose during the calendar period under consideration;
ABP is a part of the free depreciation funds of an enterprise, loaned to a business partner (partners) and other friendly enterprises or organizations at their request with guarantees of repayment of this loan at the first request of the lender, if such events took place.
The actual amount of accumulated undistributed net profit of the enterprise for the period of calendar time under consideration - Pchn is determined by the following difference:
Pnch = Poch - Prch, (2)
where Poch is the total amount of undistributed and distributed net profit of the enterprise for the period of calendar time under consideration;
Prch - the amount of distributed profit of the enterprise for the considered period of calendar time.
Based on the above considerations, the enterprise’s own investment capital, accumulated from traditional internal sources of investment resources by the time its value is assessed, X is the sum:
X = Ano + Pnch + Abp. (3)
In this expression, the axiom is taken for granted that, if necessary (in particular, for investment purposes), all existing debts to the enterprise in question must and will be repaid as soon as possible.
In recent years, quite often, enterprise management uses unused depreciation charges to replenish working capital. From the standpoint of an exemplary accounting policy of an enterprise, such a practice is hardly legal. However, if the reverse process of compensation for the amount of accumulated depreciation charges of an enterprise, spent at different times for other purposes, is possible, from the funds of its production working capital, then such a situation can be considered quite acceptable.
In addition to the above-mentioned traditional internal sources of investment resources of the enterprise, as necessary, to increase its investment capital, other possible own sources of such resources can be considered and used:
Proceeds from the sale of securities of third-party companies, firms, enterprises and organizations - VTS, owned by the enterprise in question, if it has these securities;
revenue from the rental of vacant (currently unused) areas for production, warehouse and administrative purposes, as well as part of the land plot of the enterprise - Vap, if such opportunities exist;
proceeds from the sale of non-core and excess core assets of the enterprise - VNA, if any;
initial or additional issue of securities of an enterprise - securities, placement and sale of them on stock exchanges.
Taking into account these possibilities, the formula for determining the total amount of the enterprise’s own investment capital - Xo takes the form:
Ixo = Ano + Pnch + Abp + Vtsb + Vap + Vna + Etsb. (4)
It goes without saying that the elements Vpb, Vap, Vna and Etsb included in formula (4) are substituted into it in the form cleared of required taxes and fees.
All elements of formula (4), starting with the fourth, belong not only to the enterprise’s own investment capital, but also to its investment potential.
If an enterprise is part of a corporation (consortium, conglomerate, other forms of association of enterprises), by a special decision of the founders and the Board of Directors of this company, additional investment capital can be allocated for it from the corporate “common pot” of free funds.
In addition, in certain specific cases, one of the internal sources of an enterprise’s investment resources can be a part of the distributed net profit aimed at replenishing its investment capital in the form of a portion of the dividends allocated for these purposes by the founders - holders of the largest blocks of ordinary and preferred shares of this enterprise. It all depends on the degree of investment attractiveness and the expected socio-economic efficiency of the project under consideration.
When the enterprise’s own (internal) investment resources are not enough to implement the planned investment project of modernization and innovation, they resort to searching for external sources of these resources.
The main forms of attraction by an enterprise of the amounts of funds required for investment from the outside:
Taking out a loan of appropriate size from state or commercial banks secured by the property of the enterprise;
obtaining a similar loan from the same banks under guarantees from the national and state governments, i.e. without collateral of enterprise property;
obtaining the same loan from the same banks under the guarantee of solvent, wealthy legal entities or individuals, also without collateral of their property;
borrowing money from business partners and other enterprises and organizations in contact (in particular, from large financially secure clients) under guarantees of repayment of the borrowed amounts upon the first request of the lender;
finding and implementing opportunities for targeted financing of the planned well-founded investment project for the modernization and innovatization of the enterprise in question - Federal Target Program through public or private corporations, venture funds, funds for the development and implementation of innovations, etc.;
options for public-private partnership in allocating the missing investment resources required by the enterprise under consideration - IRP.
General formulas for determining the total investment capital of an enterprise - Sikp have the following form:
Sikp = Ixo + Ksz + Zsp
or
Sikp = Ixo + Kbz + Zsp
or (5)
Sikp = Ixo + Ftsp
or
Sikp = Ixo + Irp,
where Ksz and Kbz are bank loans to the enterprise in question, respectively, with and without collateral of all or part of its property;
ZSP - funds borrowed by the enterprise in question from business partners or from other enterprises and organizations connected with it in one way or another under guarantees of repayment of the borrowed debts upon demand.
There are other ways for an enterprise to attract investment resources from external sources. For example, requesting and receiving advances from some of its customers as partial prepayments for future deliveries of products, performance of work and/or provision of services in the near future. A significant increase in the investment capital and investment potential of an enterprise can be achieved by issuing, placing and selling on the stock market appropriately sized blocks of its preferred shares.
Legal and financial-economic relations between enterprises-mortgagors and banks-mortgagors are thoroughly discussed in the publication. The same book describes in detail the methods for determining the collateral value of collateral objects.
The amount of a loan requested by an enterprise from a bank against collateral certainly depends on the fair market value of the pledged property and the degree of its liquidity. The more expensive the collateral is and the higher its liquidity, the larger the bank loan you can get.
Typically, the objects of collateral for obtaining relatively small bank loans by an enterprise are its machinery, equipment, vehicles and self-propelled mechanisms. To obtain larger loans, enterprises can first mortgage warehouse and office buildings, other objects of their own real estate, as well as their land plots with improvements and encumbrances, if they own them.
The value of the collateral value of the collateral object - Сз, as a rule, is determined by the corresponding product of two value-forming indicators:
Sz = Av x Kzd, (6)
where Ср is the fair market value of the property pledged by the enterprise, thousand cash units;
Kzd - collateral discount, showing how different the values of the pledged property Cp at the time of its assessment will be and the collateral value Cz established by the bank for a specific credit transaction.
The collateral discount Kzd is determined by the ratio:
Kzd = 1 - Sz / Avg. (7)
The range of spread of Kz values, judging by the mentioned book, is 20 - 60%.
The same publication provides a more differentiated gradation of the values of the collateral discount, depending on the degree of liquidity, characterized by the approximate period of sale of the collateral object in months of calendar time.
This gradation is shown in the table:
In cases where the enterprise itself with or without a land plot is used as the object of collateral, the value of its fair market value Ср is proposed to be determined by the normative-income (resource) method according to the specified formula given in the article, adjusted to take into account the terms of the specific agreement of such collateral .
At the beginning of the article, the concept of the investment potential of an enterprise is given at the actually achieved level of its production and commercial use and development. Of much greater interest to the owners, top management and investment and financial analysts of an enterprise is the assessment of its investment potential with the normative full production load of existing capacities for the production of both core and by-products (related) products, as well as for the implementation of the corresponding volumes of work and provision of the required services. Methods for determining the production and productivity potential of an enterprise are presented in the most detailed manner in the monograph. The standard amounts of accumulated depreciation charges - Ann and accumulated retained net profit - Pon at the enterprise are determined respectively by formulas (1) and (2), in which instead of the indicators Anp and Poch the indicators Ann and Pon are substituted. In this case, the indicators of the total standard amount of depreciation charges and the total standard amount of net profit of the enterprise for the calendar period under consideration are calculated according to the corresponding indicators of its productive potential. As a rule, the values of the indicators Ann and Pon will almost always be much higher than the values of the indicators Anp and Poch, i.e. the investment potential of an enterprise, with the normative full use of its production, productive and sales (commercial) potential, will always be higher than the investment potential of this business object, calculated for the actual level of its production and commercial load.
If the calculated or estimated cost of an investment project for the modernization and innovatization of a particular enterprise significantly exceeds its investment potential, then the owners and senior management of this business entity, as a rule, have to make one - the most effective and prudent management decision out of three possible in such cases:
Postpone the implementation of the investment project under consideration until better times, when the possibility of finding the required financial resources is expected;
implement only the most cost-effective autonomous parts (stages) of the developed investment project, if it can be divided accordingly and taking into account the total amount of investment capital generated at the enterprise;
once and for all abandon the implementation of this investment project as financially unsustainable.
The strategy and tactics of the economic activities of enterprises should always be built on the principle of “live and develop within your means and capabilities” within the framework of available investment capital and investment potential, without getting into unaffordable debts. This principle certainly applies to investment projects for the development of enterprises, the economic efficiency of which has been convincingly proven. The implementation of investment projects for the modernization and innovation of enterprises brings the greatest economic effect in cases where their production, productive and social capabilities as a result of the implementation of these projects are used to their full potential.
The greatest success in economic life is usually achieved at those enterprises whose owners and managers do not make mistakes when choosing, justifying the feasibility and timeliness of implementing planned investment projects, and the danger (probability) of such mistakes is high for many reasons. It is difficult for an enterprise to earn and/or borrow investment capital, it is easy to spend it, but achieving a timely return of the funds spent with the expected profit is problematic, difficult, and sometimes impossible.
Having almost completed the preparation of this article, the author considered it advisable to get acquainted with the contents of the book “Investment Capital of an Enterprise” in the hope of finding something in it that would improve the thoroughness and quality of coverage of the issue addressed in the article. Unfortunately, the hope was not realized. Apart from the feeling of confused eclecticism, “porridge” and “noodles before the eyes,” there was nothing left in my head. There is a lot of everything and virtually nothing in essence. An amazing discrepancy between the title of the book and its main content. The text does not even have a clear definition of the concept of what is called the investment capital of an enterprise.
