One of the most relevant categories for the modern economy is investment. They are at the level of international economic relations, but any private person who has enough money for this or a source from where to get them can also engage in investments. This means that the economic essence of enterprise investment is one of the key concepts for modern science and practical economics. But despite the importance and significance, it is still not formulated accurately. The modern theory of economics needs an accurate concept of the term "investment", as well as practical economics.
Definitions: theory in practice
The term "investment" is understood to mean a situation where someone with money invests them in the enterprise. Moreover, they do not take into account at all whether this person should also make managerial decisions that control investment policy. Typically, this is a phenomenon known as “consumer investment”. These are the most common acquisitions - televisions, cars. In reality, they are not investments, but they serve for a long time, which is why this fork of concepts was formed.
The definition, classification of investments, the economic essence of this concept are important not only for scientists, but also for economists of different levels. It is necessary to be able to single out the essence of investment in a particular act in order to reasonably say whether spending money is an investment. For example, if money is invested in the same machines, which will then be resold, then this can be called a type of investment, the economic essence is evident here. It is important to distinguish between the current financial support of the project and investment in it.
The essence of investment: through economic management
The importance of the term and the vagueness of the approach to its formulation made it necessary to develop the following general approach to the study of the investment phenomenon: it was decided to define investments through the essence of this action.
The economic nature of investment and investment activity is related to the subject. Scientists say that this economic category is associated with technology, society, and other aspects of human life up to the protection of nature. In a word, all areas in which one can invest money are connected in one way or another with the definition of the essence of the term.
Investment is a category term. It is described by economic parameters and expresses the interests of a certain person. Investing involves an analysis of the possibilities of managing the economy at the macro, micro level.
Investment and the economics process
The economic nature and classification of investments are studied through the economic process. This is due to the fact that investment is the most active option for attracting capital to the economic space. The direct link between savings and investment is what economists are interested in more than anything else.
One of the significant terms is “capitalist”. Describes an entity that has capital and invests in it. If someone is just accumulating large stocks of finance, it is incorrect to call him capitalist. But participation in the investment system turns the person into an active element of the current economic system.
Save and spend
It is not necessary to invest all the money in investments.Say, if some company has formed a large positive balance in the accounts, it can send part of this money into investments, but not the entire amount at its disposal. Some volumes should be an inviolable reserve, others - set aside for solving everyday tasks, ensuring solvency. There must be liabilities. The economic essence of investments is the assets of the enterprise.
The part of the accumulated funds that is allocated to investments must be regularly analyzed to determine how high the level of consumption is. There are certain boundaries depending on the marginal product of capital and depreciation.
Investments and savings
The economic essence of real investment lies in the possibility of applying in practice the accumulated by the enterprise in an alternative form. Capital accumulates in different forms, each of them gives its own capabilities, has special mechanisms through which it is possible to use. Money is the most universal form of investment used to develop an enterprise. True, in practice it is often necessary to transform them into another form - material or intangible. When the transaction is completed, capital can be invested according to a pre-planned strategy.
Investments and Production
The economic nature and significance of investments is most clearly revealed by participation in the production process. The capital invested in a company is usually directed to solving various production problems. Economists talk about the factor of production. We are talking about the application received by the company in the form of investments, coupled with other resources of the organization.
The main production factors used in the work along with investments are labor, natural resources. The most simple and low-tech production needs labor and investment. The more complex and higher the level of development of an organization, the more factors must work together.
To success together
The economic nature of the investments involved in the workflow, along with other factors, is the creation of a balanced economic environment in the enterprise. For this, many factors must interact, and the situation must be controlled by specialists. The combination of investments with different production factors gives different results. That is, the creation of a given volume of product is possible due to a combination of:
- investment and labor;
- investments, labor and high-tech reserves;
- other combinations.
Each of them gives, to a greater or lesser degree, a qualitative result that satisfies (or not) the management of the enterprise.
Contribution to economic activity
The economic essence of investments in an alternative reading is the ability to invest in business activities. This means that when a person transfers funds to an enterprise, a person thereby forms for himself such a volume of property that will help produce products and realize other interests.
The individual, legal entity, directing the investment, selects the most promising of the available objects in the investment market. It is important to formulate what property values come first. This determines which tools should be used. Specialists call them assets. Based on this, the economic essence of investments is a form of transformation of accumulated resources into assets.
With this approach, it is said that investment is a combinatorial process, that is, there is a combination with different factors, which ultimately allows you to increase, improve, activate the process of manufacturing consumer goods or capital goods. Additionally, you can stock up capital.
The effect of entrepreneurship
Investing is one of the methods of generating the effect of entrepreneurial activity. In this case, the main task pursued is the achievement of the set goals, possibly economic, but it is allowed to set non-economic tasks - environmental, impact on society.
Investments are primarily intended to achieve economic growth due to an increase in capital. Also, investments allow you to make more net profit flow and serve as a means of preserving the capital invested in the enterprise.
Looking to the future
It is possible to estimate in advance what economic effect can be obtained from investing through analysis of the potential of a particular investment program. There are formulas by which it is calculated how much a particular offer can generate income. At the same time, it is believed that it is investment - that forms the inflows of finance in the future. That is, today you need to invest money so that the profit from them in the future would be sufficient.
No matter how potentially attractive the investment program, it will not bring money by itself. If the investor knows how to choose working tools, then it will be possible to realize the potential of financial investment. This task is engaged in investment management.
Investments and Market
Investment resources are necessary for any modern enterprise. Investments, assets, goods - all this makes up the investment market. There are prices, a range of offers and features of demand. The market relations characteristic of this type of market differ from the usual ones for the average person.
The investment market is associated with the labor market, services, goods. The state, in turn, regularly introduces new laws to keep the investment market under tight control.
Investment resources are an object of high demand. Tools, products of any enterprise are necessary to implement a well-developed investment strategy. At the same time, as entities in the process, not only enterprises are involved, but also other persons conducting entrepreneurship. Typically, an offer is made by the producer of the capital goods, the person owning the real estate, as well as financial institutions and persons who own intangible assets. The value formation is determined by the investment attractiveness of the offer, the assessment of which takes into account the demand in the investment market in the current economic situation as a whole. Typically, price is the interest rate of the capital market.