Before exploring such a concept as investment in fixed assets, you need to consider in more detail the definition of the term "fixed capital".
Definition
Fixed capital is represented by the property of a business entity in monetary terms. Its structure includes material assets in the form of real estate and equipment, land and transport, financial assets in the form of securities, debt of counterparties and investments. Also, intangible assets (licenses, patents and grants) are included in fixed capital.
Based on the foregoing, it should be noted that investments in fixed assets are financial investments, which contribute to purchases, as well as the creation with subsequent expansion of fixed assets of the organization. As a result of such attraction of additional funds, it becomes possible to build new facilities, repair and upgrade equipment, or to acquire new transport, inventory, or the necessary tools. Also, a sufficient amount of investment in fixed assets allows you to purchase real estate, to carry out other actions that contribute to the development of a business entity.
Investment role
In order to occupy a high competitive position in a particular market, any enterprise seeks to improve its own technologies, improve its own commercial efficiency and viability.
In the implementation of any production activity, resources are used. Ultimately, such consumption creates finished products. The consumed resources are monetary, tangible and intangible assets, which are simply necessary for the functioning of a business entity. Therefore, it is investment in fixed assets that is the main driving force behind the growth of production volumes and its economic viability.
Attracting additional capital also contributes to a finer and more flexible regulation of prices for finished products, an increase in the level of profitability and the structuring of the production process itself.
Sources of investment in fixed assets
As noted above, investment is the main stimulating force for the development of any enterprise. However, it (strength) may require additional funding.
The structure of fixed capital investments is represented by equity and borrowed funds. So, the sources of creating your own funds are usually attributed to profit and depreciation. Investment in fixed assets is financed through bank loans, loans from other business entities, budgetary and extra-budgetary funds, as well as foreign investments.
Each business entity keeps a record of investments with the determination of factors affecting their performance. In addition to the above sources of these investments, it is also necessary to highlight such as the issue of shares of companies.
In this case, one must not forget about charity, which is acquiring considerable importance in the structure of investments. It is necessary to take into account the fact that any cash contributions can be allocated as joint-stock companies or holding companies, but also by entire groups of industrial funds. These deposits have an irrevocable principle and serve as the most promising source of financial development for both an individual company and the economy as a whole.
The result of attracting investment
The main indicator of the effectiveness of this area of economic activity is the index of investment in fixed assets, which shows the level of success of the functioning of an economic entity.
Factors influencing the attraction of additional finance
The following factors have a significant impact on the rate of return on these investments:
- competitiveness of goods or finished products of a business entity;
- operational efficiency of the enterprise’s production capacities, as well as their level of workload and rationality of use;
- the effectiveness of professional and high-quality implementation of investment projects at the enterprise;
- rational use of material, labor and financial resources of the organization.
The effectiveness of investment in fixed assets at the state level depends on:
- state economic policy;
- development of the tax system;
- social environment;
- real investment risks;
- level of investment potential.
Own investments in Russia
Analyzing the statistical material over the past years, we can confidently say that investment in fixed assets of Russia has a constant structure. So, the largest share of such investments goes to the construction of buildings and structures. In second place are investments in basic production tools in the form of equipment, machinery and vehicles. And finally, in third place are additional funds aimed at developing the housing stock of the Russian Federation.
Foreign investment
Currently, Russia is quite successfully cooperating with various countries. The level of her investment attractiveness is quite high.
For example, cooperation with France is to attract investment not in the mining (raw materials), but in the processing industries.
US and UK investments have been quite successfully used in titanium production, design and development of civil aviation.
However, considering the events of 2014 (the application of sanctions against the Russian Federation), the following should be noted: last year, the volume of foreign investment fell significantly (by as much as 70%). And this despite the fact that in 2013 the Russian Federation in this indicator occupied third place after China and the United States. Now it’s not even in the top ten.
A significant decrease in the level of investment is associated with the conclusion of a Rosneft deal with the British company British Petroleum in 2013.
Thus, in 2014 the first place in direct investment China is located, Hong Kong is on the second and the USA is on the third.
Conclusion
Summing up the material presented in this article, it should be noted that investment in fixed assets is an effective resource for the development of both a separate business entity and the state economy as a whole. Therefore, appropriate measures must be taken both at the country level and at the enterprise level to attract additional funds.
