Investments and capital investments
Investment is a relatively new term for our economy. Within the framework of a centrally planned system, the concept of "capital investment" was used. The concept of "investment" is broader than the concept of "capital investment". Investments include both real and portfolio investments. Real investments - investments in fixed and working capital. Portfolio investments - investments in securities and assets of other enterprises.
The Federal Law No. 39-FZ of February 25, 1999 “On investment activity in the Russian Federation carried out in the form of capital investments” provides the following definitions for the concepts of “investments” and “capital investments”:
« Investments- cash, securities, other property, including property rights, other rights having a monetary value, invested in objects entrepreneurial activity and (or) other activities for the purpose of making a profit and (or) achieving another positive effect.
« Capital investments― investments in fixed capital (fixed assets), including the costs of new construction, expansion, reconstruction and technical re-equipment of existing enterprises, the purchase of machinery, equipment, tools, inventory, design and survey work and other costs.
Based on this definition, investments invested in working capital cannot be considered capital investments. By direction of use capital investments are classified into production and non-production. Production capital investments are directed to the development of the enterprise, non-production - to the development of the social sphere.
According to the forms of reproduction of fixed assets, capital investments are distinguished:
A) new construction
B) for the reconstruction and technical re-equipment of existing enterprises;
C) to expand existing enterprises;
D) for the modernization of equipment.
By funding source distinguish between centralized and decentralized capital investments.
In the most general sense, investments or capital investments are understood as a temporary refusal of an economic entity from the consumption of resources (capital) at its disposal and the use of these resources to increase its welfare in the future.
The simplest example of investment is spending Money for the acquisition of property characterized by significantly less liquidity - equipment, real estate, financial or other non-current assets.
The main features of investment activity that determine approaches to its analysis are:
Irreversibility associated with the temporary loss of the use value of capital (for example, liquidity).
Expectation of an increase in the initial level of well-being.
Uncertainty associated with attributing results to a relatively long-term perspective.
It is customary to distinguish between two types of investments: real and financial (portfolio). In the further presentation of the material, we will mainly talk about the first of them.
It should be noted that in the case of real investment, the condition for achieving the intended goals, as a rule, is the use (operation) of the relevant non-current assets for the production of certain products and their subsequent sale. This also includes, for example, the use of the organizational and technical structures of a newly formed business to make a profit in the course of the statutory activities of an enterprise created with the attraction of investments.
Investment project
If the volume of investments is significant for a given economic entity in terms of its impact on its current and prospective financial condition, the adoption of appropriate management decisions should be preceded by the planning or design stage, that is, the stage of pre-investment studies, culminating in the development of an investment project.
An investment project is a plan or program of activities related to the implementation of capital investments and their subsequent reimbursement and profit.
The task of developing an investment project is to prepare the information necessary for an informed decision-making regarding the implementation of investments.
The main method for achieving this goal is mathematical modeling of the consequences of making appropriate decisions.
Budget Approach and Cash Flows
For modeling purposes, an investment project is considered in a time base, and the analyzed period (research horizon) is divided into several equal intervals - planning intervals.
For each planning interval, budgets are compiled - estimates of receipts and payments, reflecting the results of all operations performed in this time period. The balance of such a budget - the difference between receipts and payments - is the cash flow of the investment project for a given planning interval.
If all components of the investment project are expressed in monetary terms, we will get a series of cash flow values that describe the process of implementation investment project. In the enlarged structure, the cash flow of an investment project consists of the following main elements:
Investment costs.
Revenue from the sale of products.
Production costs.
At the initial stage of the project (investment period), cash flows, as a rule, turn out to be negative. This reflects the outflow of resources that occurs in connection with the creation of conditions for subsequent activities (for example, the acquisition of non-current assets and the formation of net working capital).
After the completion of the investment and the beginning of the operating period associated with the start of operation of non-current assets, the value cash flow tends to be positive.
Additional revenue from the sale of products, as well as additional production costs incurred during the implementation of the project, can be both positive and negative values. In the first case, this may be due, for example, to the closure of unprofitable production, when the decline in revenue is covered by cost savings. In the second case, a reduction in costs is modeled as a result of their savings during, for example, equipment upgrades.
Technically, the task of investment analysis is to determine what will be the amount of cash flows on a cumulative basis at the end of the established research horizon. In particular, it is fundamentally important whether it will be positive.
Profit and depreciation
AT investment analysis the concepts of profit and cash flow, as well as the related concept of depreciation, play an important role.
The economic meaning of the concept of "profit" is that it is a capital gain. In other words, this is an increase in the welfare of an economic entity that manages a certain amount of resources. Profit is the main goal of economic activity.
As a rule, profit is calculated as the difference between the income received from the sale of products and services for a given time interval and the costs associated with the production of these products (rendering services).
It should be specially noted that in the theory of investment analysis the concept of "profit" (however, like many other economic concepts) does not coincide with its accounting and fiscal interpretation.
In investment activity, the fact of making a profit is preceded by the reimbursement of the initial investment, which corresponds to the concept of "amortization" (in English, the word "amortization" means "repayment of the main part of the debt"). In case of investment in outside current assets This function is performed by depreciation deductions. Thus, the justification for fulfilling the main requirements for a project in the field of real investment is based on the calculation of the amounts of depreciation and profit within the established research horizon. This amount, in the most general case, will be the total cash flow of the operating period.
Cost of capital and interest rates
The concept of "cost of capital" is closely related to the economic concept of "profit".
The value of capital in the economy lies in its ability to create added value, that is, to make a profit. This value in the corresponding market - the capital market - determines its value.
Thus, the cost of capital is the rate of return that determines the value of disposing of capital over a certain period of time (usually a year).
In the simplest case, when one of the parties (seller, lender, creditor) transfers the right to dispose of capital to another party (buyer, borrower), the cost of capital is expressed in the form of an interest rate.
The interest rate is determined based on market conditions (that is, the availability of alternative options for using capital) and the degree of risk of this option. At the same time, one of the components market value capital turns inflation.
When performing calculations at constant prices, the inflation component can be excluded from the interest rate. To do this, use one of the modifications of the well-known Fisher formula:
Where r is the real interest rate, n- nominal interest rate, i- the rate of inflation. All rates and inflation rates in this formula are given as decimals and must refer to the same time period.
In general, the interest rate corresponds to the share of the principal amount of the debt (principal), which must be paid at the end of the billing period. Bets of this kind are called simple.
Interest rates that differ in the duration of the settlement period can be compared with each other through the calculation of effective rates or compound interest rates.
Calculation effective rate carried out according to the following formula:
, where e- effective rate, s- simple bet N- the number of periods of interest accrual within the considered interval.
The most important component of the cost of capital is the degree of risk. It is due to the various risks associated with various forms, directions and terms of capital use that the capital market at any given time can experience various estimates its value.
Discounting
The concept of "discounting" is one of the key in the theory of investment analysis. The literal translation of this word from English ("discounting") means "cost reduction, markdown".
Discounting is the operation of calculating the present value (the English term "present value" can also be translated as "present value", "present value", etc.) of amounts of money relating to future periods of time.
The opposite of discounting, the calculation of the future value of an initial amount of money, is called accretion or compounding and is easily illustrated by an example of an increase in the amount of debt over time at a given interest rate:
, where F- future, and P- the modern value (initial value) of the amount of money, r- interest rate (in decimal terms), N- number of interest periods.
The transformation of the above formula in the case of solving the inverse problem looks like this:
Discounting methods are used if it is necessary to compare values cash receipts and payments spread over time. In particular, the key criterion for investment efficiency - net present value (NPV) - is the sum of all cash flows (receipts and payments) arising during the period under review, given (recalculated) at one point in time, which is usually chosen as moment of commencement of the investment.
As follows from all of the above, the interest rate used in the formula for calculating the present value is no different from the usual rate, which in turn reflects the cost of capital. In the case of using discount methods, this rate, however, is usually referred to as the discount rate ( possible options: "comparison rate", "barrier rate", "discount rate", "reduction factor", etc.).
A qualitative assessment of the effectiveness of an investment project largely depends on the choice of the discount rate. Exists a large number of various methods to justify the use of one or another value of this rate. In the most general case, you can specify the following options for choosing a discount rate:
The minimum return on an alternative use of capital (for example, the rate of return on reliable market valuable papers or deposit rate in a reliable bank).
The current level of return on capital (for example, the company's weighted average cost of capital).
The cost of capital that can be used to implement this investment project (for example, the rate on investment loans).
The expected level of return on invested capital, taking into account all the risks of the project.
The rate options listed above differ mainly in the degree of risk, which is one of the components of the cost of capital. Depending on the type of discount rate chosen, the results of calculations related to the assessment of the effectiveness of investments should also be interpreted.
Tasks of evaluation of the investment project
The main goal of an investment project evaluation is to substantiate its commercial (entrepreneurial) viability. The latter involves the fulfillment of two fundamental requirements:
Full recovery (payback) of invested funds.
Receiving profit, the amount of which justifies the rejection of any other way of using resources (capital) and compensates for the risk arising from the uncertainty of the final result.
It is necessary to distinguish between two components of the commercial viability of an investment project, its necessary and sufficient conditions, respectively:
Economic efficiency of investments.
Financial viability of the project.
An economic assessment or an assessment of the effectiveness of capital investment is aimed at determining the potential of the project under consideration to provide the required or expected level of profitability.
When performing investment analysis, the task of evaluating the effectiveness of capital investments is the main one that determines the fate of the project as a whole.
The financial assessment is aimed at choosing a project financing scheme and thus characterizes the possibilities for realizing the project's economic potential.
The assessment should follow an economic approach and consider only those benefits and losses that can be measured in monetary terms.
Investment project evaluation stages
The investment project development cycle can be represented as a sequence of three stages (stages):
Formulation of the project idea
Assessment of the investment attractiveness of the project
Choosing a project financing scheme
Each stage has its own tasks. As you move through the stages, the idea of the project is refined and enriched with new information. Thus, each stage is a kind of intermediate finish: the results obtained at it should serve as confirmation of the feasibility of the project and, thus, are a "pass" to the next stage of development.
At the first stage, the possibility of implementing the project is assessed from the point of view of marketing, production, legal and other aspects. The initial information for this is information about the macroeconomic environment of the project, the intended market for the product, technologies, tax conditions, etc. The result of the first stage is a structured description of the project idea and a time schedule for its implementation.
The second stage in most cases is decisive. Here, the evaluation of the effectiveness of investments and the determination of the possible cost of the capital involved. The initial information for the second stage is the capital investment schedule, sales volumes, current (production) costs, the need for working capital, and the discount rate. The results of this stage are most often presented in the form of tables and investment performance indicators: net present value (NPV), payback period, internal rate of return (IRR).
This stage of project evaluation corresponds to the computer model "MASTER OF PROJECTS: Preliminary evaluation".
The last - the third - stage is associated with the choice of the optimal scheme for financing the project and the assessment of the effectiveness of investments from the position of the owner (holder) of the project. For this, information about interest rates and loan repayment schedules, as well as the level of dividend payments, etc. The results of the financial evaluation of the project should be: financial plan project implementation, forecast forms of financial statements and indicators of financial solvency. The computer model "MASTER PROJECTS: Budget Approach" corresponds precisely to this stage of project evaluation.
Any method of investment analysis involves considering the project as a conditionally independent economic object. Therefore, at the first two stages of development, an investment project should be considered separately from the rest of the activities of the enterprise that implements it.
The isolated (local) nature of the consideration of projects excludes the possibility of a correct choice of schemes for their financing. This is due to the fact that the decision to attract one or another source for financing capital investments is made, as a rule, at the level of the enterprise as a whole or its financially independent subdivision. In this case, first of all, the current financial condition of this enterprise is taken into account, which is almost impossible to reflect in a local project.
Thus, at large enterprises, the task of choosing a financing scheme for an investment project (at least for projects classified as "large") necessarily goes to the highest level of management. At the level of middle management, the task remains to select the most effective, that is, the most potentially profitable projects from the existing list 1 .
Capital investments as a way of reproduction of fixed assets
A constant and inexhaustible source of growth in social productivity of labor is scientific and technological progress and the use of the latest developments in production technology.
The progress of science determines technical development. The latter causes continuous significant changes in all factors of the production process, and also affects the people who manage this process. Changes in the internal structure of the production organism are commonly called innovation.
Changes in the structure of production do not have to be due to the introduction of new means of production, but in most cases this is the reason. Innovations, on the other hand, usually require capital investments.
Fixed assets are created through capital investments. Their size, structure and location create a base that significantly affects the volume of products, their quality and range, and the possibility of further development of production.
Assimilated capital investments, as a rule, are used for a long time: buildings serve 20-100 years, machinery and equipment - 3-10 years or more. Thus, fixed assets largely characterize the state of engineering and technology at the time of capital investment. Ill-considered implementation of capital investments can adversely affect the technical development and improvement of technology, since significant funds may be required in the future for the reconstruction and modernization of fixed assets.
Part of the newly received funds (net income) the society does not use directly for consumption, but spends on the creation of new structures, machinery and equipment, which will pay off and begin to benefit society only in the future. For capital investments to be effective, the invested funds must return in a larger volume. From this point of view, capital investments should ensure ever more complete satisfaction of the needs of society and create conditions for obtaining a social product with a cost acceptable to the consumer at the lowest cost of social labor. These requirements are fully valid for both National economy as well as for individual companies.
The funds at the disposal of society are limited and can be used in different ways. Possible options for their use, as a rule, differ in different capital intensity and give different profits. From an economic point of view, preference should be given to the option that gives the best desired effect.
When making capital investments, economic criteria are important, but not the only ones. For example, capital investments aimed at improving the environment serve to preserve certain production factors, etc. In such cases, capital investments should be evaluated in accordance with non-economic criteria.
Knowledge and analysis of resource requirements for the production of certain types of products make it possible to choose one or another variant of capital investments and determine the sectors in which the available resources can be used with the greatest return.
Economic conditions and the natural environment are very difficult to change. Relatively easy to change sectors are primarily labor and means of production. When calculating economic efficiency, land, labor and means of production are considered as objects of capital investment. Each of these factors can be considered individually or in combination.
The purpose of capital investment is to to achieve (after their development) a more complete satisfaction of the needs of society. This is the main requirement from which one should proceed when deciding on the advisability of additional capital investments. New means of production are introduced into the system of previously used means of production, for the formation of which certain costs (labor, financial resources) were made, and, naturally, the requirement is put forward that these costs pay off to the maximum extent.
Capital investments- this is a part of the income used for expanded reproduction. In the most general sense, capital investments are a certain amount of social labor allocated for the reproduction of fixed assets.
Capital investments can be used in different ways. It is possible to direct capital investments to increase land fertility, purchase of machinery, equipment, construction of buildings, etc.
Depending on the functions performed in the production process, capital investments subdivided into:
A) sent to replace living labor;
B) directed to the intensification of production;
C) aimed at improving the conditions of production and labor.
Capital investments aimed at replacing living labor make it possible to save the latter. This group includes capital investments in the purchase of machinery and equipment. Machines replace human labor and increase productivity. In most cases, the volume of production does not increase, however, such investments can have an intensifying effect (for example, as a result of reducing losses, increasing the volume of production due to the timely implementation of the necessary operations, etc.).
Capital investments aimed at intensifying production lead directly to an increase in output. This may include the costs of some construction work, for example, the construction of greenhouses, the purchase of containers for petroleum products, etc.
The third group includes capital investments, the result of which, in relation to production, is called indirect. They are necessary in the modern production process, but in themselves do not contribute to either an increase in production volume or an increase in labor productivity. This includes, for example, production facilities. Without them, this or that production is impossible, although the buildings themselves, as a rule, do not have an intensifying effect on the production process and do not contribute to increasing labor productivity. And only the internal equipment of structures, their location and appropriate preparation can contribute to an increase in labor productivity.
The above division is relative. As a rule, no clear line can be drawn between the individual effects of capital investment.
The main method of expanded reproduction of fixed capital are direct investments (capital investments).
Direct investments represent the costs of creating new fixed assets, expansion, reconstruction and technical re-equipment of existing ones. The ratio of costs in these areas is called reproductive structure direct investment.
To new construction include the cost of constructing facilities at new sites.
Extension means construction of the second and subsequent stages of the enterprise, additional production complexes and industries, as well as the construction of new or expansion of existing workshops of the main purpose.
Reconstruction represents a complete or partial re-equipment and reorganization of an enterprise (without the construction of new and expansion of existing workshops for the main production purpose, with the exception of, if necessary, the creation of new and expansion of existing auxiliary and service facilities) with the replacement of obsolete and worn-out equipment, mechanization and automation of production , elimination of disproportions in technological links and auxiliary services. As a result of the reconstruction, an increase in the volume of production based on a new, more modern technology, an expansion of the range or an increase in the quality of products, and an improvement in their competitiveness in the market are achieved. Reconstruction can also be carried out in order to change the profile of the enterprise and organize the production of new products on existing production facilities.
Technical re-equipment includes a set of measures (without expanding production areas) to improve the technical level of individual production sites, units, installations to modern requirements by introducing new equipment and technology, mechanizing and automating production processes, modernizing and replacing obsolete and worn-out equipment with new, more productive ones; elimination of "bottlenecks", improvement of the organization and structure of production. Both the listed and other organizational and technical measures are designed to ensure the growth of labor productivity, the volume of output, the improvement of its quality, conditions and organization of work and other indicators of the enterprise.
Technological structure of direct investment consists of three main elements:
acquisition of equipment, tools and inventory;
expenses for construction and installation works;
other direct investments, which include design and survey work, early implementation of measures to put the facilities under construction into operation (training personnel for the main professions of workers for enterprises under construction, etc.).
The ratio of costs for equipment, construction and installation works and other capital investments form technological structure of direct investments. The most economically advantageous is the structure dominated (in terms of specific weight) by equipment costs.
Work on the construction of enterprises, facilities, structures is carried out either directly by enterprises and economic organizations that make capital investments (economic method of construction), or by special construction and installation organizations under contracts with customers (contract method of construction).
In the economic way construction at each enterprise, construction departments are created, mechanisms and equipment are purchased for them, construction workers are attracted, and a production base is formed.
Contract method means that construction work is carried out by construction and installation organizations established for this purpose on the basis of contracts with customers. The performance of work under contracts ensures mutual control of the customer and the contractor, contributes to a more efficient, economical use of material, labor and financial resources.
Thus, with the contract method, construction is carried out by permanent organizations. This provides the conditions for creating a stable cadre of workers with the necessary qualifications and equipping construction organizations with modern technology. Contractors systematically accumulate production experience and can high level perform construction work.
Under industry structure Capital investments are understood as their distribution and correlation by branches of industry and the national economy as a whole. Its improvement lies in ensuring proportionality and in more rapid development those industries that ensure the acceleration of scientific and technical progress in the entire national economy.
Under the territorial structure capital investments are understood as their distribution and ratio in the total population for individual economic regions, regions, territories and republics of the Russian Federation.
The meaning of improving the territorial structure of capital investments is that it allows you to get the maximum economic and social effect.
Currently, real investments in Russia are carried out mainly in the form of capital investments, and the accumulation fund is formed in the order of distribution of profits between the budget and business entities. In addition, a part of the compensation fund is directed to capital investments in the form of depreciation charges.
Sources of financing capital investments are closely related to the financial and credit mechanism of the investment sphere, where they are implemented in practice.
Capital investments in fixed assets are financed on the territory of the Russian Federation at the expense of:
1. own financial resources and on-farm reserves of investors (net profit; depreciation; savings of citizens and legal entities; funds paid by insurance authorities in the form of compensation for losses from natural disasters, accidents, etc.);
2. borrowed financial resources of investors (bank loans, bonded loans, etc.);
3. attracted financial resources of investors (funds received from the issue of shares, share and other contributions of individuals and legal entities to the authorized capital);
4. funds centralized by voluntary unions (associations) of enterprises and financial and industrial groups;
5. funds federal budget provided on a gratuitous and reimbursable basis; funds of the budgets of the constituent entities of the Russian Federation;
6. funds off-budget funds(for example, road fund);
7. funds of foreign investors.
As part of own funds investors include profit and depreciation.
After paying taxes and other payments from profits to the budget, enterprises have a net profit. The enterprise has the right to allocate part of it for capital investments of an industrial and social nature, as well as for environmental protection measures. This part of the profit can be used for investments as part of an accumulation fund or other similar fund created by enterprises.
The second major source of investment financing in the fixed assets of enterprises are depreciation charges (as an integral part of the compensation fund). In the process of operation, fixed assets gradually wear out, that is, they lose their original physical properties, as a result, their real book value decreases.
Distinguish between physical (material) wear and tear and cost depreciation, including, in addition to the monetary expression of physical depreciation, a certain amount of obsolescence. Cost depreciation is compensated by accumulating funds included in the cost of products (works, services) in the form of depreciation charges. The value of the latter depends on the book value of fixed assets and the established rates of their depreciation. Usually, the depreciation rate is determined as a percentage of the book value and differentiated based on the type of fixed assets and their operating conditions. The amount of depreciation should be sufficient for the construction or acquisition of new facilities to replace decommissioned ones.
Cost depreciation is not accrued for fully depreciated objects, even if they continue to function normally (with the exception of buildings and structures). In most cases, depreciation rates were determined by groups of fixed assets, which consisted of many inventory items. If the enterprise has equipment for which there are no established norms, depreciation is charged according to the norms for similar objects.
In order to create financial conditions for the fastest introduction of scientific and technological achievements into production and increase the interest of enterprises in the accelerated renewal of the active part of fixed assets, they were allowed to use the method of accelerated depreciation of machinery and equipment. Accelerated depreciation is the target method of faster compared to the standard life of fixed assets and the full transfer of their book value to production and distribution costs.
Enterprises have the right apply method accelerated depreciation in relation to fixed assets used to increase the output of computer technology, new progressive types of materials and equipment, expand exports of products, as well as in cases where worn-out and obsolete equipment is massively replaced with new, more productive equipment.
When introducing accelerated depreciation, enterprises use uniform (linear) method of its accrual. At the same time, the norm of annual depreciation charges approved for the corresponding inventory object increased, but not more than twice. The need to apply the accelerated depreciation mechanism in a larger amount was agreed with the financial authorities of the constituent entities of the Russian Federation. The decision to apply the mechanism of accelerated depreciation within a month was brought by enterprises to the relevant tax authorities.
Small enterprises in the first year of operation were entitled to additionally write off as depreciation deductions up to 50% of the initial cost of fixed assets with a service life of more than three years, as well as to carry out their accelerated depreciation on a general basis. Upon termination of the activities of a small enterprise before the expiration of one year, the amount of additional accrued depreciation was subject to recovery due to an increase in balance sheet profit.
Depreciation deductions made using the accelerated method were used by enterprises for their intended purpose. In the event of their misuse, the additional amount of depreciation, which corresponded to the calculation under the accelerated method, was included in the taxable base and was subject to taxation in accordance with the current legislation.
Depreciation is calculated monthly for newly registered fixed assets, starting from the 1st day of the month following the month of receipt. For retired objects, depreciation is terminated from the 1st day of the month following the month of their retirement from operation.
In a relationship intangible assets depreciation deductions are made in equal shares during the period of their existence. If the period of use of an intangible asset cannot be determined, then its depreciation period is set at 20 years.
To create favorable economic conditions and stimulate the active renewal of fixed assets, the state uses the mechanism of their periodic revaluation.
In case of insufficiency of own sources of financing capital investments, the enterprise has the right to attract long-term bank loans, as well as funds mobilized in the securities market.
Financing of state centralized capital investments can also be carried out at the expense of budgetary funds provided on a non-refundable and repayable basis.
The state regulates investment activities by supporting federal targeted construction programs, allocating budgetary funds to finance them.
To open financing for state centralized capital investments on an irrevocable basis, state customers provide the Ministry of Finance of the Russian Federation with extracts from the approved list of construction projects and facilities indicating the volume of capital investments and government contracts (contracts) for the construction of facilities for federal needs.
The Ministry of Finance of the Russian Federation transfers funds within one month after the approval of the volumes of centralized capital investments and the list of construction projects for state (federal) needs to state customers, and they provide on an irrevocable basis to direct customers (developers) within the limits of the amount of financing reported to them by the Ministry of Finance of the Russian Federation. Developers provide banks that carry out operations to provide funds with the following documents:
Title lists of newly started construction projects, broken down by years;
Government contracts (contracts) for the entire period of construction, indicating the form of payment for the work performed;
Consolidated estimates of the cost of construction;
The conclusion of the state non-departmental expertise on project documentation;
Updated volumes of capital investments and construction and installation works for transitional construction projects.
Government customers submit monthly reports to the Russian Ministry of Finance on the use of federal budget funds provided on an irrevocable basis to finance centralized capital investments.
Federal budget funds, which are provided on a repayable basis to finance state centralized capital investments, are allocated to the Ministry of Finance of Russia central bank Russia. The Ministry of Finance of Russia sends these borrowed funds to developers through commercial banks in accordance with agreements concluded with these banks. The list of commercial banks that carry out operations to finance borrowers (developers) is established by the Government Commission on Credit Policy on the proposal of the Russian Ministry of Finance, and also taking into account the opinion of the Central Bank of Russia. Federal budget funds received by commercial banks from the Russian Ministry of Finance are allocated to borrowers (developers) on a contractual basis.
To conclude contracts for the receipt of these funds, borrowers (developers) submit the following documents to banks:
1) extracts from the list of construction projects and facilities for state federal needs;
2) government contracts (contracts);
3) calculations substantiating the timing of the output of the commissioned production facilities to the design capacity;
4) calculations of the terms for the return of issued funds and interest on them;
5) the conclusion of the state non-departmental expertise on project documentation;
6) documents confirming the solvency of the borrower and the repayment of funds.
Federal budget funds are provided on a repayable basis to borrowers secured by movable and immovable property in accordance with the pledge legislation of Russia.
Federal budget funds received by commercial banks and provided on a reimbursable basis may be used strictly for their intended purpose only to finance capital investments for state federal needs.
The return by borrowers (developers) of federal budget funds provided on a repayable basis is carried out within the time limits determined by the concluded agreements. The Ministry of Finance of the Russian Federation returns the loan (together with accrued interest) to the Central Bank of Russia. Interest for the use of federal budget funds provided on a repayable basis is accrued from the date of their issuance to borrowers in accordance with the concluded agreements. The interest rate is set in an agreement between the Russian Ministry of Finance and the Central Bank of Russia.
Financing and lending for the construction of objects of mixed investment at the expense of the federal budget, own and other sources are carried out in the manner established for the provision of budgetary appropriations.
Financing of capital investments at the expense of investors' own funds is carried out by agreement of the parties. Construction partners independently determine the procedure for customers (developers) to deposit their own funds to bank accounts to finance capital investments and mutual settlements. Forms of payment for construction and installation works, supplies of material, energy resources and services for the construction of facilities are determined by work contracts (contracts). They are concluded by customers (developers) and contractors for the entire period of construction.
Calculations for construction objects are carried out according to contract value. The contractual value (price) of the construction object can be calculated:
In accordance with the project, taking into account the special conditions in the construction contract (fixed price);
At the actual cost of construction, with the addition of the agreed value of the contractor's profit (open price).
In modern conditions, enterprises of various forms of ownership independently develop investment programs and ensure their implementation with appropriate material and financial resources. The plan for the formation of investments is not a directive document for the enterprise, but determines the strategy of its financial capabilities for the coming year.
When developing a strategy for the formation of investment resources, five main methods of financing investment programs and projects are usually considered:
Self-financing;
Shareholding (issue of own shares);
Credit financing;
Investment leasing and selenge;
Combined (mixed) financing.
The most promising is the method of self-financing (self-investment). To determine the share of own funds in the total investment, you can use the self-financing ratio.
Ksf \u003d Ss / I,
where Сс - own funds of the enterprise (net profit and depreciation), р.; AND - total amount investment, r.
The recommended value of the indicator is not lower than 0.51 (51%). At a lower value, the enterprise loses its financial independence in relation to external sources of financing (borrowed and borrowed funds).
Shareholding as a method of financing investments is usually used for the implementation of large-scale projects with sectoral or regional diversification of investment activities (for example, in the oil and gas complex of Russia).
Loan financing usually acts in two forms: in the form of obtaining long-term bank loans for the implementation of specific projects and bonded loans.
Bond loans can be issued only by well-known joint-stock companies (corporations or financial and industrial groups), the solvency of which is not in doubt among investors (creditors).
Leasing and investment selenge are used when there is a lack of own funds for real investments, as well as for capital investments in projects with a short operating period or with a high degree of technology variability.
Leasing allows the enterprise-lessee to quickly acquire the equipment it needs, without simultaneously diverting significant financial resources from its turnover.
Investment property - new form attraction of financial resources used by a number of companies in Russia. It is a specific form of obligation, consisting in the transfer by the owner (legal entity or citizen) of the rights to use and dispose of his property for a period of time for a certain fee. Such property can be both non-current assets (buildings, structures, equipment) and current assets (cash, securities, etc.). In this case, the owner remains the owner of the leased property and may return it upon request. The Seleng Company attracts and freely uses, at its own discretion, the property and individual property rights of legal entities and citizens. Therefore, in terms of the form of financing, the investment seleng is close to banking.
Selenge is an effective method of financing various areas of economic activity, including investment. With the help of Selenga it turns out financial aid companies experiencing an acute shortage in various types of resources, including cash. Therefore, in foreign practice, the seleng has become one of the important methods of financing investments in various fields entrepreneurial activity.
Mixed financing is based on various combinations of these methods and can be implemented in all forms of investment.
Long-term lending of capital investments
The need for long-term lending of capital investments arises from the shortage of own funds that often occurs in enterprises, which is due to the discrepancy between the available financial resources and the need for them for expanded reproduction of fixed capital. In this case, there are long-term credit relations between the borrower and the lender (bank).
Long-term loans from commercial banks are now being attracted to real and fast-realizing projects with a high rate of return (yield) on investments. Unlike budgetary funds, attracting long-term bank loans for capital investments increases the responsibility of borrowers for their rational use due to the repayment and payment of borrowed funds. Only large commercial banks are now able to engage in long-term lending of capital investments, but subject to the provision of tax incentives, because with high inflation there are no criteria for the expediency of credited activities. Commercial banks in Russia in modern conditions are unlikely to be engaged in long-term lending for the construction of large facilities without benefits that compensate for losses compared to the results of short-term lending. The exception is those provided by several banks to one reliable borrower for the implementation of a highly profitable project (if the rate of return on it exceeds the loan interest rate).
The objects of bank lending for capital investments enterprises of all forms of ownership are the costs:
1. for the construction, expansion and reconstruction of industrial and non-industrial facilities;
2. acquisition of movable and immovable property (buildings, equipment, etc.);
3. formation of new enterprises with the participation of foreign investors;
4. creation of scientific and technical products, intellectual values and other objects of property.
The procedure for granting, processing and repaying long-term loans (for a period of more than one year) is regulated by the rules of banks and loan agreements with borrowers.
When setting the terms and frequency of repayment of a long-term loan, the bank takes into account:
Cost recovery due to the net profit of the borrower;
The solvency of the enterprise;
Level of credit risk;
Opportunities to accelerate the turnover of credit resources.
To obtain a long-term loan, the borrower submits to the bank documents characterizing his solvency:
balance sheet as of the last reporting date;
report about incomes and material losses;
feasibility studies and calculations to them, confirming the effectiveness and payback of costs for credited activities and projects.
The amounts of loans received in rubles are credited to the settlement account or special bank accounts, as well as to the foreign currency account (when receiving a loan in foreign currency).
The long-term loan pays for construction and installation works, supplies of equipment, design products and other resources for construction. The return of borrowed funds for newly started construction projects and facilities begins after they are put into operation within the terms established by the agreements. For facilities being built at operating enterprises, the repayment of loans begins before the commissioning of these facilities.
Interest for the use of credit resources is accrued from the date of their provision in accordance with the concluded agreements between enterprises and banks. Repayment of interest for the use of borrowed funds is carried out:
A) for newly started construction projects and facilities - after they are put into operation within the time limits specified by the loan agreements;
B) for facilities constructed at existing enterprises - monthly from the date of receipt of these funds.
Conditions for opening capital investment financing
Proper organization and planning of capital investments are important conditions for opening the procedure for their financing. Capital investments are planned both for the country as a whole and for industries and enterprises. A number of organizations can participate in the development of large capital investments: the customer, the contractor, the general designer and supplier organizations.
A contractor is an organization that prepares and provides construction for itself or for a future consumer. The supplier organization enters into a supply contract for construction. The general designer is an organization authorized to carry out design work and has concluded an agreement on the development of project documentation.
The main document is the preliminary project of capital investments. It should contain the name of the object under construction, the scheme of binding to the terrain, the justification and purpose of construction, requirements for efficiency and a comprehensive description of the technical and economic level of construction. This includes the expected production technology, total construction costs and additional investments, the required number of employees, the technical and economic characteristics of the product, the need for raw materials, energy and water, the need for transport due to the location of the facility. An important part of the preliminary design is the assessment of the impact of the facility under construction on the environment. The preliminary project specifies the terms for preparation of project documentation, start of construction and commissioning of the facility.
The preliminary design forms the basis for the development of a project assignment, in which capital investments are specifically allocated and justified by individual items of expenditure and functions. The design assignment defines the requirements for the technical, economic and architectural levels of construction and indicates its timing. The project assignment contains an economic part, which should reflect the overall efficiency of construction.
During the development of the project assignment, it is necessary to coordinate its individual points with the regulatory authorities. These are, in particular, issues of industrial hygiene, fire safety, occupational health and safety, environmental protection, etc. The design task must be agreed with the state committees of the appropriate level.
The project documentation is divided into an explanatory note and a working draft. For small buildings, a project can be developed, consisting of one part, having a structure explanatory note, which contains the details of the working project. In these cases, the simplest project documentation is developed, limited to a description of the progress of work, the necessary drawings, a list of materials and an estimate.
Financing the repair of fixed assets
Repair is one of the forms of reproduction of fixed assets (funds), which wear out and lose their performance over time.
Repair is understood as a set of operations to restore the serviceability or performance of tools or their components, taking into account the use of opportunities to improve their technical parameters (productivity, power, etc.). In accordance with the methodology adopted in Russia, the repair of buildings, structures, equipment and other fixed assets is divided into capital and current. Overhaul is performed to restore the health of the inventory object resource with the replacement or restoration of any of its parts, including the basic ones. Current repair is carried out to ensure or restore the operability of the product and consists in the replacement of its individual parts.
The enterprise independently develops a plan for the overhaul of fixed assets for the coming year and schedules for repair work on individual inventory items. The basis for drawing up such a plan is the cost estimate and technical documentation, which takes into account the current norms, prices and tariffs. The capital repair plan and cost estimates are approved by the head of the enterprise and serve as the basis for financing repair work.
The enterprise has the right to independently choose the method of attributing the costs associated with repairs to production and distribution costs:
Include in the cost of the actual costs of repairs after their implementation;
Create a repair fund (cash reserve) at the expense of the cost price;
Attribute, if necessary, the actual costs of repairs to deferred expenses with their subsequent monthly write-off to the cost of products (works, services).
When carrying out repair work in a contractual way, it is advisable to cover the costs of repairs at the expense of the repair fund created at the enterprise. It is designed to more evenly incorporate repair costs into product costs to prevent significant fluctuations in profit margins within a year.
The repair fund is formed at the expense of deductions included monthly in the cost of production according to the standards established by the enterprise itself as a percentage of the book value of fixed assets. In this case, the actual repair costs, as the contractor submits invoices for the repair work performed, are reimbursed from the repair fund.
Issuance of advance payments to contractors, payment for repair work in the case of a contractual method of their production are carried out from the settlement account of the enterprise in the presence of an agreement concluded with the contractor and an act of acceptance of work performed 2 .
The efficiency of capital investments
capital investment are called investments aimed at the construction or acquisition of objects fixed assets (funds). Capital investments are otherwise referred to as investments in fixed assets).
Capital investments can be used to create new objects of fixed assets or to reconstruct their existing objects.
There is an objective trend, according to which in dynamics, i.e. over time, the proportion of capital investments that are directed to reconstruction, including the technical re-equipment of production, in the total amount of capital investments is constantly increasing.
In this regard, the proportion of capital investments allocated for the construction of new fixed assets is decreasing accordingly. The fact is that reconstruction is more cost-effective than new construction, since it requires significantly lower costs and is carried out in a shorter time than the construction of new fixed assets.
Funds that are invested in fixed (or capital) assets, as well as in long-term securities, are capital investments. This is a collective term. Capital investments differ from funds invested in short-term securities or current assets. If things go well, then non-capital assets are turned over within a twelve-month period. reporting period, that is, the fiscal year, and the activity of the enterprise in terms of the turnover of these investments can be reflected in the report. Capital investments cannot be kept within this period.
The accounting report reflects all investments and capital investments on account 08, which is dedicated to investments in non-current assets. In order for the accounting to pass without errors, there is a certain procedure for its implementation. Guidelines on accounting fixed assets, as well as for real estate, if investments and capital investments have already been completed for these objects, primary accounting documents regarding acceptance and transfer have already been drawn up and submitted for state registration, where the changes made and actually operated will be recorded, are listed in detail in paragraph 52 of this provision.
Real investments in fixed assets (fixed capital) include the costs of expanding existing enterprises or new construction, reconstruction, purchase of equipment or machinery, technical re-equipment, design or survey work, and similar costs. Accounting for capital investment incorporates many components. This also includes investments in the construction of housing, cultural and household facilities.
Capital investments (or capital-forming) are constantly present both in statistical accounting and in economic analysis. Their economic content is part of the social product, basically it is an accumulation fund, which is directed to reproduction. Investment in capital construction, in the acquisition of means of labor, equipment - this is the main form of investment of funds according to the term in question.
Capital investments can be made as individuals, and legal, and, of course, the state. The concept of capital investment is interpreted quite broadly, but the main goal of such investments is usually the same - it is work for the development of the national economy, its material and technical base, an increase in industrial production capacity or Agriculture as well as any other industries. This is work to accelerate the pace of scientific and technological progress.
The basis for the development or creation of the material and technical base of associations, enterprises and entire industries are capital investments. Real investment (what we call the direct purchase of capital in a variety of forms) is an investment in reproduction, intangible assets, in the future growth of commodity or material stocks. This is mostly related to the production or operational (commercial) activities of the enterprise. Today, real investments have the following main forms.
The process of managing capital investments is carried out in stages. First, you need to analyze the real investment of the previous period, assess the level of activity of the enterprise in terms of investments and the degree of completion of previously launched investment programs and projects. It is necessary to study the dynamics of the total volume of capital investment in the growth of real assets, to designate specific gravity investments in the total volume of investments of the preplanning period. Consider the degree of implementation of investment programs and projects with the level of development of resources invested for this purpose, that is, everything related to objects to which real investment was applied. Determine the degree of completion of already started programs and projects, specify the required volume investment resources to complete them are the following steps. And then - to study the degree of effectiveness of already completed real investment programs at the stage of their operation. Consider these forms of capital investment in accordance with the indicators that have been projected.
The next step is to determine the total volume of real investment in the period to come: the main indicator here is the volume of growth planned in the enterprise's funds (for each of the individual types), the planned volume of current and intangible assets that will ensure the growth of production and commercial activities. Here it is necessary to take into account the dynamics of unfinished investments, that is, budget investments in capital construction projects that have not been completed before. After that, the form and structure of capital investments should be determined in accordance with the areas of activity of the enterprise in order to ensure the reproduction of intangible assets and fixed assets, expanding the volume of own assets intended for turnover.
According to the goals of real investment, after choosing the form of capital investments, it is necessary to start developing investment projects. First, a business plan is developed within the framework of this enterprise. Small real investment projects can be outlined in a short version of the business plan, where only sections that determine the feasibility of the project are disclosed in detail. In addition to drawing up a business plan, this stage of management requires many more actions before designing. First of all, this is the study of the investment market with the current offer, where the most realistic of them are selected for a thorough study, corresponding to the regional and sectoral diversification of the enterprise.
Then you need to consider the conditions and opportunities for acquiring technologies, equipment or other types of individual assets, and then conduct a detailed examination of the selected investment objects. The next stage of capital investment management is to correctly assess the effectiveness of selected or developed projects, taking into account all risk factors, with an analysis and evaluation of efficiency - whether the market value of this enterprise will increase. In parallel, it is necessary to identify and assess the risks that are inherent in each investment project, to check their compliance with the level of expected income.
The formation of the program of the investment project of the enterprise is carried out on the basis of evaluation and ranking according to the criterion of profitability, liquidity and risks, as well as compliance with the investment policy of the enterprise of each individual project. Since there are objective restrictions on the total and possible volume of investment resources, the program should include such projects that will ensure the highest rate of development of the enterprise in the strategic period and the growth of its market value. The main thing is to ensure the implementation of all individual investment projects and the implementation investment program. The tools in this case are the development of a capital budget, the choice of a financing scheme, and the preparation of a calendar schedule for implementation.
The financing scheme for each project should determine the financial basis for its implementation, and therefore it is the foundation for building investment resources, planning budgets for the implementation of individual works. Typically, a capital budget is developed for a period of up to a year, reflecting all receipts and all expenses that are associated with the implementation of this project. The schedule of the program should determine the specific time for the completion of each of the individual types of work, with the risk of non-performance being assigned to specific people - representatives of the enterprise or contractor. It is necessary to ensure constant monitoring and control of the implementation of investment projects and programs. At this stage of management, the enterprise is under investment controlling in relation to the main performance indicators of each investment project. This control continues until the very end. life cycle projects and programs.
Capital investments are the basis for the development of any type of production, for their independence in market conditions. The state, with the help of real investments, strengthens its own defense capability. Investments in capital construction (social, housing, cultural - residential buildings, schools and universities, hospitals, kindergartens, stadiums, theaters, museums, and so on) directly meet social needs and demands.
Capital investments can be carried out without the construction stage, when agricultural machinery is purchased, vehicles, technological equipment. And here two terms - investments and capital investments - characterize any movement in the sphere of the economy, since they have common characteristic features. First of all, these are people who are building their own business or trying to set up someone else's to get passive income for myself. And secondly, it is always a large financial value with long term its development, and these are almost always high risks.
With long-term investments, it is possible to create new and modernize existing enterprises both in the country and abroad. The main thing is to master these funds so that they bring profit. Venture investments, that is, risky investments, are designed for a quick return on investment, most often this is the issue of shares in new areas of high-risk business. Direct investment is the investment of funds in the authorized capital in order to benefit and obtain the rights to manage this business entity.
Portfolio investments are associated with a set of investment values - this is the purchase of assets and securities. Annuities are investments that generate income regularly, they are invested in pension and insurance funds. investment opportunities in modern world There are many, and each of them has its pros and its risks. This applies to stocks, and bonds, and government securities, and stock papers, and real estate.
If the company's fixed capital is invested, these are capital investments that can support existing production or build a new one. The structure of capital investments is based on the fact that investments are made in non-current assets, that is, these are capital-forming investments. It is at the expense of capital investments that the enterprise often operates.
You can, of course, spend capital and get quick profits. However, future profits will be lost in the long run, and the ability to compete in the market is likely to be as well. To analyze future profitability, you need to know the structure of capital investments and all changes related to investment policy. The structure can be sectoral, territorial, reproductive, technological, and each type has many features.
In order to attract investments, an enterprise must, first of all, have a comprehensively considered and long-term plan for its future activities. Investors will definitely want to be sure that their deposits will not go to waste, but on the contrary, they will bring worthy profits. In addition, a good reputation is important. Investors are unlikely to invest in a shadow enterprise, they definitely need to have confidence. And this means that the company's activities should be open and transparent, with a clear financial statements and well-functioning work with the means mass media. There is no doubt that investors choose enterprises for their deposits in those countries where stability prevails.
In practice, however, all these conditions are more relevant to portfolio investors. The investor's confidence in the disposal of profit from invested capital can be guaranteed not even by transparency of accounting and respected legality, but by connections in parliament or government, and the investor can also gain the right to direct supervision through the purchase of a controlling stake and personal guidance.
Financing the work of the enterprise can be carried out through investments or capital investments. What are the specifics of both instruments?
Under investments understood in relation to long-term investments funds for the development of the enterprise. By means of this, as a rule, the fundamental components of the business are financed - fixed assets, personnel, scientific developments, the modernization of production, the promotion of the brand and the goods produced by it.
Investments are classified into several main categories: venture, direct, portfolio, and annuity.
Venture investments are investments in projects that have a potentially very high return, and at the same time are not guaranteed in any way. There is a risk that investments will be completely unprofitable. Venture investments are usually directed to finance innovative businesses, those that form new segments in the economy.
Direct investment is an investment in the capital of the company in exchange for the partner receiving rights to participate in the management of the company. They are practiced mainly in the relationship between investors and owners of large businesses, international holdings.
Portfolio investment is an investment in the capital of a firm in exchange for a partner receiving a share in the business. Typical for most corporations. A type of portfolio investment can be considered the purchase of shares of the company at the stock exchange.
Annuity investments involve the purchase of a company's securities that bring a guaranteed income at certain intervals. For example, it can be investments in the company's bonds.
There are investments of a special kind - sponsorship. They do not require the partner to make a profit, but create certain conditions for the emergence of indirect factors for the investor to acquire preferences in the future. For example, in the form of increasing brand awareness. These investments cannot be considered gratuitous, since the sponsor as a whole expects to receive appropriate preferences. But his partner, having received financial support, as a rule, has no legal obligations to the investor.
Under capital investments It is customary to understand the financing by the company at the expense of its own funds, as well as through investment contracts of various activities aimed at improving the efficiency and competitiveness of the company. The financial resources that the company spends under this scheme can be directed to:
Economists also classify capital investments into productive and non-productive. The first are those that are directly related to the activities of the enterprise. To the second - those that are not directly related to it. Thus, capital investments aimed at solving social problems, as a rule, are classified as non-productive.
As we noted above, funds for making capital investments in a business can be attracted from outside - through investment contracts. In this case, they will be classified on the same grounds according to which they are divided into certain categories of investments. That is, they will have a venture character, be direct, portfolio or annuity investments.
The main difference between investments and capital investments is that the former are not always targeted and are not in all cases directed to optimizing production, while the latter, as a rule, meet these criteria.
Investment is a way to replenish the company's working capital. Capital investments - the mechanism of their spending. Moreover, the presence of the first does not always mean their use as the second. Investments can be spent, for example, on organizing a large-scale celebration of an event significant for the life of the company, on providing sponsorship to sports teams.
Investment is the attraction of capital from the outside, through partnership contracts. Capital investments can be made at the expense of the firm's own funds. However, if the capital is attracted, the condition for the implementation of the relevant investments will be the successful receipt of investments. In addition, the company's agreement with the investor may stipulate that the funds must be directed to specific purposes - and in this case, the capital investment will actually be an investment in its pure form.
The owners and managers of many firms prefer not to distinguish between the concepts of investments and capital investments, considering both of them in the context of a set of activities related to increasing the competitiveness of a business. But if a significant percentage financial transactions within the framework of solving this problem cannot correspond to the signs of investing in fixed assets of the company, then it will not be quite correct to call them capital investments.
For example, financing advertising and promoting a brand in the market is, of course, an activity to increase the competitiveness of a business. But it has nothing to do with production, personnel, development, and therefore, by most criteria, cannot be considered as an example of capital investment.
Having studied the difference between investments and capital investments, we will reflect the conclusions in the table.
Investments and capital investments
Investment is a relatively new term for our economy. Within the framework of a centrally planned system, the concept of "capital investment" was used. The concept of "investment" is broader than the concept of "capital investment". Investments include both real and portfolio investments. Real investments - investments in fixed and working capital. Portfolio investments - investments in securities and assets of other enterprises.
The Federal Law No. 39-FZ of February 25, 1999 “On investment activity in the Russian Federation carried out in the form of capital investments” provides the following definitions for the concepts of “investments” and “capital investments”:
« Investments- cash, securities, other property, including property rights, other rights having a monetary value, invested in objects of entrepreneurial activity and (or) other activities in order to make a profit and (or) achieve another positive effect.
« Capital investments― investments in fixed capital (fixed assets), including costs for new construction, expansion, reconstruction and technical re-equipment of existing enterprises, purchase of machinery, equipment, tools, inventory, design and survey work and other costs.
Based on this definition, investments invested in working capital cannot be considered capital investments. By direction of use capital investments are classified into production and non-production. Production capital investments are directed to the development of the enterprise, non-production - to the development of the social sphere.
According to the forms of reproduction of fixed assets, capital investments are distinguished:
A) new construction
B) for the reconstruction and technical re-equipment of existing enterprises;
C) to expand existing enterprises;
D) for the modernization of equipment.
By funding source distinguish between centralized and decentralized capital investments.
In the most general sense, investments or capital investments are understood as a temporary refusal of an economic entity from the consumption of resources (capital) at its disposal and the use of these resources to increase its welfare in the future.
The simplest example of investment is spending money on the acquisition of property characterized by significantly less liquidity - equipment, real estate, financial or other non-current assets.
The main features of investment activity that determine approaches to its analysis are:
Irreversibility associated with the temporary loss of the use value of capital (for example, liquidity).
Expectation of an increase in the initial level of well-being.
Uncertainty associated with attributing results to a relatively long-term perspective.
It is customary to distinguish between two types of investments: real and financial (portfolio). In the further presentation of the material, we will mainly talk about the first of them.
It should be noted that in the case of real investment, the condition for achieving the intended goals, as a rule, is the use (operation) of the relevant non-current assets for the production of certain products and their subsequent sale. This also includes, for example, the use of the organizational and technical structures of a newly formed business to make a profit in the course of the statutory activities of an enterprise created with the attraction of investments.
Investment project
If the volume of investments is significant for a given economic entity in terms of its impact on its current and prospective financial condition, the adoption of appropriate management decisions should be preceded by the planning or design stage, that is, the stage of pre-investment studies, culminating in the development of an investment project.
An investment project is a plan or program of activities related to the implementation of capital investments and their subsequent reimbursement and profit.
The task of developing an investment project is to prepare the information necessary for an informed decision-making regarding the implementation of investments.
The main method for achieving this goal is mathematical modeling of the consequences of making appropriate decisions.
Budget Approach and Cash Flows
For modeling purposes, an investment project is considered in a time base, and the analyzed period (research horizon) is divided into several equal intervals - planning intervals.
For each planning interval, budgets are compiled - estimates of receipts and payments, reflecting the results of all operations performed in this time period. The balance of such a budget - the difference between receipts and payments - is the cash flow of the investment project for a given planning interval.
If all the components of the investment project are expressed in monetary value, we will get a series of cash flow values that describe the process of implementing the investment project. In the enlarged structure, the cash flow of an investment project consists of the following main elements:
Investment costs.
Revenue from the sale of products.
Production costs.
At the initial stage of the project (investment period), cash flows, as a rule, turn out to be negative. This reflects the outflow of resources that occurs in connection with the creation of conditions for subsequent activities (for example, the acquisition of non-current assets and the formation of net working capital).
After the completion of the investment and the beginning of the operating period associated with the start of the operation of non-current assets, the amount of cash flow, as a rule, becomes positive.
Additional revenue from the sale of products, as well as additional production costs incurred during the implementation of the project, can be both positive and negative values. In the first case, this may be due, for example, to the closure of unprofitable production, when the decline in revenue is covered by cost savings. In the second case, a reduction in costs is modeled as a result of their savings during, for example, equipment upgrades.
Technically, the task of investment analysis is to determine what will be the amount of cash flows on a cumulative basis at the end of the established research horizon. In particular, it is fundamentally important whether it will be positive.
Profit and depreciation
In investment analysis, the concepts of profit and cash flow, as well as the related concept of depreciation, play an important role.
The economic meaning of the concept of "profit" is that it is a capital gain. In other words, this is an increase in the welfare of an economic entity that manages a certain amount of resources. Profit is the main goal of economic activity.
As a rule, profit is calculated as the difference between the income received from the sale of products and services for a given time interval and the costs associated with the production of these products (rendering services).
It should be specially noted that in the theory of investment analysis the concept of "profit" (however, like many other economic concepts) does not coincide with its accounting and fiscal interpretation.
In investment activity, the fact of making a profit is preceded by the reimbursement of the initial investment, which corresponds to the concept of "amortization" (in English, the word "amortization" means "repayment of the main part of the debt"). In the case of investing in non-current assets, this function is performed by depreciation. Thus, the justification for fulfilling the main requirements for a project in the field of real investment is based on the calculation of the amounts of depreciation and profit within the established research horizon. This amount, in the most general case, will be the total cash flow of the operating period.
Cost of capital and interest rates
The concept of "cost of capital" is closely related to the economic concept of "profit".
The value of capital in the economy lies in its ability to create added value, that is, to make a profit. This value in the corresponding market - the capital market - determines its value.
Thus, the cost of capital is the rate of return that determines the value of disposing of capital over a certain period of time (usually a year).
In the simplest case, when one of the parties (seller, lender, creditor) transfers the right to dispose of capital to another party (buyer, borrower), the cost of capital is expressed in the form of an interest rate.
The interest rate is determined based on market conditions (that is, the availability of alternative options for using capital) and the degree of risk of this option. At the same time, one of the components of the market value of capital is inflation.
When performing calculations at constant prices, the inflation component can be excluded from the interest rate. To do this, use one of the modifications of the well-known Fisher formula:
Where r is the real interest rate, n- nominal interest rate, i- the rate of inflation. All rates and inflation rates in this formula are given as decimals and must refer to the same time period.
In general, the interest rate corresponds to the share of the principal amount of the debt (principal), which must be paid at the end of the billing period. Bets of this kind are called simple.
Interest rates that differ in the duration of the settlement period can be compared with each other through the calculation of effective rates or compound interest rates.
The effective rate is calculated according to the following formula:
, where e- effective rate, s- simple bet N- the number of periods of interest accrual within the considered interval.
The most important component of the cost of capital is the degree of risk. It is precisely because of the various risks associated with various forms, directions and terms of capital use that different assessments of its value can be observed in the capital market at any given time.
Discounting
The concept of "discounting" is one of the key in the theory of investment analysis. The literal translation of this word from English ("discounting") means "cost reduction, markdown".
Discounting is the operation of calculating the present value (the English term "present value" can also be translated as "present value", "present value", etc.) of amounts of money relating to future periods of time.
The opposite of discounting, the calculation of the future value of an initial amount of money, is called accretion or compounding and is easily illustrated by an example of an increase in the amount of debt over time at a given interest rate:
, where F- future, and P- the modern value (initial value) of the amount of money, r- interest rate (in decimal terms), N- number of interest periods.
The transformation of the above formula in the case of solving the inverse problem looks like this:
Discounting methods are used if it is necessary to compare the amounts of cash receipts and payments spaced over time. In particular, the key criterion for investment efficiency - net present value (NPV) - is the sum of all cash flows (receipts and payments) arising during the period under review, given (recalculated) at one point in time, which is usually chosen as moment of commencement of the investment.
As follows from all of the above, the interest rate used in the formula for calculating the present value is no different from the usual rate, which in turn reflects the cost of capital. In the case of using discount methods, this rate, however, is usually called the discount rate (possible options: "comparison rate", "barrier rate", "discount rate", "reduction factor", etc.).
A qualitative assessment of the effectiveness of an investment project largely depends on the choice of the discount rate. There are a large number of different methods to justify the use of one or another value of this rate. In the most general case, you can specify the following options for choosing a discount rate:
The minimum rate of return of an alternative use of capital (for example, the rate of return on reliable marketable securities or the rate of deposit in a reliable bank).
The current level of return on capital (for example, the company's weighted average cost of capital).
The cost of capital that can be used to implement this investment project (for example, the rate on investment loans).
The expected level of return on invested capital, taking into account all the risks of the project.
The rate options listed above differ mainly in the degree of risk, which is one of the components of the cost of capital. Depending on the type of discount rate chosen, the results of calculations related to the assessment of the effectiveness of investments should also be interpreted.
Tasks of evaluation of the investment project
The main goal of an investment project evaluation is to substantiate its commercial (entrepreneurial) viability. The latter involves the fulfillment of two fundamental requirements:
Full recovery (payback) of invested funds.
Receiving profit, the amount of which justifies the rejection of any other way of using resources (capital) and compensates for the risk arising from the uncertainty of the final result.
It is necessary to distinguish between two components of the commercial viability of an investment project, its necessary and sufficient conditions, respectively:
Economic efficiency of investments.
Financial viability of the project.
An economic assessment or an assessment of the effectiveness of capital investment is aimed at determining the potential of the project under consideration to provide the required or expected level of profitability.
When performing investment analysis, the task of evaluating the effectiveness of capital investments is the main one that determines the fate of the project as a whole.
The financial assessment is aimed at choosing a project financing scheme and thus characterizes the possibilities for realizing the project's economic potential.
The assessment should follow an economic approach and consider only those benefits and losses that can be measured in monetary terms.
Investment project evaluation stages
The investment project development cycle can be represented as a sequence of three stages (stages):
Formulation of the project idea
Assessment of the investment attractiveness of the project
Choosing a project financing scheme
Each stage has its own tasks. As you move through the stages, the idea of the project is refined and enriched with new information. Thus, each stage is a kind of intermediate finish: the results obtained at it should serve as confirmation of the feasibility of the project and, thus, are a "pass" to the next stage of development.
At the first stage, the possibility of implementing the project is assessed from the point of view of marketing, production, legal and other aspects. The initial information for this is information about the macroeconomic environment of the project, the intended market for the product, technologies, tax conditions, etc. The result of the first stage is a structured description of the project idea and a time schedule for its implementation.
The second stage in most cases is decisive. Here, the evaluation of the effectiveness of investments and the determination of the possible cost of the capital involved. The initial information for the second stage is the capital investment schedule, sales volumes, current (production) costs, the need for working capital, and the discount rate. The results of this stage are most often presented in the form of tables and investment performance indicators: net present value (NPV), payback period, internal rate of return (IRR).
This stage of project evaluation corresponds to the computer model "MASTER OF PROJECTS: Preliminary evaluation".
The last - the third - stage is associated with the choice of the optimal scheme for financing the project and the assessment of the effectiveness of investments from the position of the owner (holder) of the project. For this, information is used on interest rates and loan repayment schedules, as well as the level of dividend payments, etc. The results of the financial evaluation of the project should be: a financial plan for the implementation of the project, forecast forms of financial statements and indicators of financial solvency. The computer model "MASTER PROJECTS: Budget Approach" corresponds precisely to this stage of project evaluation.
Any method of investment analysis involves considering the project as a conditionally independent economic object. Therefore, at the first two stages of development, an investment project should be considered separately from the rest of the activities of the enterprise that implements it.
The isolated (local) nature of the consideration of projects excludes the possibility of a correct choice of schemes for their financing. This is due to the fact that the decision to attract one or another source for financing capital investments is made, as a rule, at the level of the enterprise as a whole or its financially independent subdivision. In this case, first of all, the current financial condition of this enterprise is taken into account, which is almost impossible to reflect in a local project.
Thus, at large enterprises, the task of choosing a financing scheme for an investment project (at least for projects classified as "large") necessarily goes to the highest level of management. At the level of middle management, the task remains to select the most effective, that is, the most potentially profitable projects from the existing list 1 .
Capital investments as a way of reproduction of fixed assets
A constant and inexhaustible source of growth in social productivity of labor is scientific and technological progress and the use of the latest developments in production technology.
The progress of science determines technical development. The latter causes continuous significant changes in all factors of the production process, and also affects the people who manage this process. Changes in the internal structure of the production organism are commonly called innovation.
Changes in the structure of production do not have to be due to the introduction of new means of production, but in most cases this is the reason. Innovations, on the other hand, usually require capital investments.
Fixed assets are created through capital investments. Their size, structure and location create a base that significantly affects the volume of products, their quality and range, and the possibility of further development of production.
Assimilated capital investments, as a rule, are used for a long time: buildings serve 20-100 years, machinery and equipment - 3-10 years or more. Thus, fixed assets largely characterize the state of engineering and technology at the time of capital investment. Ill-considered implementation of capital investments can adversely affect the technical development and improvement of technology, since significant funds may be required in the future for the reconstruction and modernization of fixed assets.
Part of the newly received funds (net income) the society does not use directly for consumption, but spends on the creation of new structures, machinery and equipment, which will pay off and begin to benefit society only in the future. For capital investments to be effective, the invested funds must return in a larger volume. From this point of view, capital investments should ensure ever more complete satisfaction of the needs of society and create conditions for obtaining a social product with a cost acceptable to the consumer at the lowest cost of social labor. These requirements are fully justified both for the entire national economy and for individual enterprises.
The funds at the disposal of society are limited and can be used in different ways. Possible options for their use, as a rule, differ in different capital intensity and give different profits. From an economic point of view, preference should be given to the option that gives the best desired effect.
When making capital investments, economic criteria are important, but not the only ones. For example, capital investments aimed at improving the environment serve to preserve certain production factors, etc. In such cases, capital investments should be evaluated in accordance with non-economic criteria.
Knowledge and analysis of resource requirements for the production of certain types of products make it possible to choose one or another variant of capital investments and determine the sectors in which the available resources can be used with the greatest return.
Economic conditions and the natural environment are very difficult to change. Relatively easy to change sectors are primarily labor and means of production. When calculating economic efficiency, land, labor and means of production are considered as objects of capital investment. Each of these factors can be considered individually or in combination.
The purpose of capital investment is to to achieve (after their development) a more complete satisfaction of the needs of society. This is the main requirement from which one should proceed when deciding on the advisability of additional capital investments. New means of production are introduced into the system of previously used means of production, for the formation of which certain costs (labor, financial resources) were made, and, naturally, the requirement is put forward that these costs pay off to the maximum extent.
Capital investments- this is a part of the income used for expanded reproduction. In the most general sense, capital investments are a certain amount of social labor allocated for the reproduction of fixed assets.
Capital investments can be used in different ways. It is possible to direct capital investments to increase land fertility, purchase of machinery, equipment, construction of buildings, etc.
Depending on the functions performed in the production process, capital investments subdivided into:
A) sent to replace living labor;
B) directed to the intensification of production;
C) aimed at improving the conditions of production and labor.
Capital investments aimed at replacing living labor make it possible to save the latter. This group includes capital investments in the purchase of machinery and equipment. Machines replace human labor and increase productivity. In most cases, the volume of production does not increase, however, such investments can have an intensifying effect (for example, as a result of reducing losses, increasing the volume of production due to the timely implementation of the necessary operations, etc.).
Capital investments aimed at intensifying production lead directly to an increase in output. This may include the costs of some construction work, for example, the construction of greenhouses, the purchase of containers for petroleum products, etc.
The third group includes capital investments, the result of which, in relation to production, is called indirect. They are necessary in the modern production process, but in themselves do not contribute to either an increase in production volume or an increase in labor productivity. This includes, for example, production facilities. Without them, this or that production is impossible, although the buildings themselves, as a rule, do not have an intensifying effect on the production process and do not contribute to increasing labor productivity. And only the internal equipment of structures, their location and appropriate preparation can contribute to an increase in labor productivity.
The above division is relative. As a rule, no clear line can be drawn between the individual effects of capital investment.
The main method of expanded reproduction of fixed capital are direct investments (capital investments).
Direct investments represent the costs of creating new fixed assets, expansion, reconstruction and technical re-equipment of existing ones. The ratio of costs in these areas is called reproductive structure direct investment.
To new construction include the cost of constructing facilities at new sites.
Extension means construction of the second and subsequent stages of the enterprise, additional production complexes and industries, as well as the construction of new or expansion of existing workshops of the main purpose.
Reconstruction represents a complete or partial re-equipment and reorganization of an enterprise (without the construction of new and expansion of existing workshops for the main production purpose, with the exception of, if necessary, the creation of new and expansion of existing auxiliary and service facilities) with the replacement of obsolete and worn-out equipment, mechanization and automation of production , elimination of disproportions in technological links and auxiliary services. As a result of the reconstruction, an increase in the volume of production based on a new, more modern technology, an expansion of the range or an increase in the quality of products, and an improvement in their competitiveness in the market are achieved. Reconstruction can also be carried out in order to change the profile of the enterprise and organize the production of new products on existing production facilities.
Technical re-equipment includes a set of measures (without expanding production areas) to improve the technical level of individual production sites, units, installations to modern requirements by introducing new equipment and technology, mechanizing and automating production processes, modernizing and replacing obsolete and worn-out equipment with new, more productive ones; elimination of "bottlenecks", improvement of the organization and structure of production. Both the listed and other organizational and technical measures are designed to ensure the growth of labor productivity, the volume of output, the improvement of its quality, conditions and organization of work and other indicators of the enterprise.
Technological structure of direct investment consists of three main elements:
acquisition of equipment, tools and inventory;
expenses for construction and installation works;
other direct investments, which include design and survey work, early implementation of measures to put the facilities under construction into operation (training personnel for the main professions of workers for enterprises under construction, etc.).
The ratio of costs for equipment, construction and installation works and other capital investments form technological structure of direct investments. The most economically advantageous is the structure dominated (in terms of specific weight) by equipment costs.
Work on the construction of enterprises, facilities, structures is carried out either directly by enterprises and economic organizations that make capital investments (economic method of construction), or by special construction and installation organizations under contracts with customers (contract method of construction).
In the economic way construction at each enterprise, construction departments are created, mechanisms and equipment are purchased for them, construction workers are attracted, and a production base is formed.
Contract method means that construction work is carried out by construction and installation organizations established for this purpose on the basis of contracts with customers. The performance of work under contracts ensures mutual control of the customer and the contractor, contributes to a more efficient, economical use of material, labor and financial resources.
Thus, with the contract method, construction is carried out by permanent organizations. This provides the conditions for creating a stable cadre of workers with the necessary qualifications and equipping construction organizations with modern technology. Contractors systematically accumulate production experience and can perform construction work at a high level.
Under industry structure Capital investments are understood as their distribution and correlation by branches of industry and the national economy as a whole. Its improvement consists in ensuring proportionality and in the more rapid development of those branches that ensure the acceleration of scientific and technical progress in the entire national economy.
Under the territorial structure capital investments are understood as their distribution and ratio in the total population for individual economic regions, regions, territories and republics of the Russian Federation.
The meaning of improving the territorial structure of capital investments is that it allows you to get the maximum economic and social effect.
Currently, real investments in Russia are carried out mainly in the form of capital investments, and the accumulation fund is formed in the order of distribution of profits between the budget and business entities. In addition, a part of the compensation fund is directed to capital investments in the form of depreciation charges.
Sources of financing capital investments are closely related to the financial and credit mechanism of the investment sphere, where they are implemented in practice.
Capital investments in fixed assets are financed on the territory of the Russian Federation at the expense of:
1. own financial resources and on-farm reserves of investors (net profit; depreciation; savings of citizens and legal entities; funds paid by insurance authorities in the form of compensation for losses from natural disasters, accidents, etc.);
2. borrowed financial resources of investors (bank loans, bonded loans, etc.);
3. attracted financial resources of investors (funds received from the issue of shares, share and other contributions of individuals and legal entities to the authorized capital);
4. funds centralized by voluntary unions (associations) of enterprises and financial and industrial groups;
5. federal budget funds provided on a gratuitous and reimbursable basis; funds of the budgets of the constituent entities of the Russian Federation;
6. funds from off-budget funds (for example, the road fund);
7. funds of foreign investors.
As part of own funds investors include profit and depreciation.
After paying taxes and other payments from profits to the budget, enterprises have a net profit. The enterprise has the right to allocate part of it for capital investments of an industrial and social nature, as well as for environmental protection measures. This part of the profit can be used for investments as part of an accumulation fund or other similar fund created by enterprises.
The second major source of investment financing in the fixed assets of enterprises are depreciation charges (as an integral part of the compensation fund). In the process of operation, fixed assets gradually wear out, that is, they lose their original physical properties, as a result, their real book value decreases.
Distinguish between physical (material) wear and tear and cost depreciation, including, in addition to the monetary expression of physical depreciation, a certain amount of obsolescence. Cost depreciation is compensated by accumulating funds included in the cost of products (works, services) in the form of depreciation charges. The value of the latter depends on the book value of fixed assets and the established rates of their depreciation. Usually, the depreciation rate is determined as a percentage of the book value and differentiated based on the type of fixed assets and their operating conditions. The amount of depreciation should be sufficient for the construction or acquisition of new facilities to replace decommissioned ones.
Cost depreciation is not accrued for fully depreciated objects, even if they continue to function normally (with the exception of buildings and structures). In most cases, depreciation rates were determined by groups of fixed assets, which consisted of many inventory items. If the enterprise has equipment for which there are no established norms, depreciation is charged according to the norms for similar objects.
In order to create financial conditions for the fastest introduction of scientific and technological achievements into production and increase the interest of enterprises in the accelerated renewal of the active part of fixed assets, they were allowed to use the method of accelerated depreciation of machinery and equipment. Accelerated depreciation is the target method of faster compared to the standard life of fixed assets and the full transfer of their book value to production and distribution costs.
Enterprises have the right apply the accelerated depreciation method in relation to fixed assets used to increase the output of computer technology, new progressive types of materials and equipment, expand exports of products, as well as in cases where worn-out and obsolete equipment is massively replaced with new, more productive equipment.
When introducing accelerated depreciation, enterprises use uniform (linear) method of its accrual. At the same time, the norm of annual depreciation charges approved for the corresponding inventory object increased, but not more than twice. The need to apply the accelerated depreciation mechanism in a larger amount was agreed with the financial authorities of the constituent entities of the Russian Federation. The decision to apply the mechanism of accelerated depreciation within a month was brought by enterprises to the relevant tax authorities.
Small enterprises in the first year of operation were entitled to additionally write off as depreciation deductions up to 50% of the initial cost of fixed assets with a service life of more than three years, as well as to carry out their accelerated depreciation on a general basis. Upon termination of the activities of a small enterprise before the expiration of one year, the amount of additional accrued depreciation was subject to recovery due to an increase in balance sheet profit.
Depreciation deductions made using the accelerated method were used by enterprises for their intended purpose. In the event of their misuse, the additional amount of depreciation, which corresponded to the calculation under the accelerated method, was included in the taxable base and was subject to taxation in accordance with the current legislation.
Depreciation is calculated monthly for newly registered fixed assets, starting from the 1st day of the month following the month of receipt. For retired objects, depreciation is terminated from the 1st day of the month following the month of their retirement from operation.
With regard to intangible assets, depreciation deductions are made in equal installments during the period of their existence. If the period of use of an intangible asset cannot be determined, then its depreciation period is set at 20 years.
To create favorable economic conditions and stimulate the active renewal of fixed assets, the state uses the mechanism of their periodic revaluation.
In case of insufficiency of own sources of financing capital investments, the enterprise has the right to attract long-term bank loans, as well as funds mobilized in the securities market.
Financing of state centralized capital investments can also be carried out at the expense of budgetary funds provided on a non-refundable and repayable basis.
The state regulates investment activities by supporting federal targeted construction programs, allocating budgetary funds to finance them.
To open financing for state centralized capital investments on an irrevocable basis, state customers provide the Ministry of Finance of the Russian Federation with extracts from the approved list of construction projects and facilities indicating the volume of capital investments and government contracts (contracts) for the construction of facilities for federal needs.
The Ministry of Finance of the Russian Federation transfers funds within one month after the approval of the volumes of centralized capital investments and the list of construction projects for state (federal) needs to state customers, and they provide on an irrevocable basis to direct customers (developers) within the limits of the amount of financing reported to them by the Ministry of Finance of the Russian Federation. Developers provide banks that carry out operations to provide funds with the following documents:
Title lists of newly started construction projects, broken down by years;
Government contracts (contracts) for the entire period of construction, indicating the form of payment for the work performed;
Consolidated estimates of the cost of construction;
The conclusion of the state non-departmental expertise on project documentation;
Updated volumes of capital investments and construction and installation works for transitional construction projects.
Government customers submit monthly reports to the Russian Ministry of Finance on the use of federal budget funds provided on an irrevocable basis to finance centralized capital investments.
The funds of the federal budget, which are provided on a repayable basis for financing state centralized capital investments, are allocated to the Ministry of Finance of Russia by the Central Bank of Russia. The Ministry of Finance of Russia sends these borrowed funds to developers through commercial banks in accordance with agreements concluded with these banks. The list of commercial banks that carry out operations to finance borrowers (developers) is established by the Government Commission on Credit Policy on the proposal of the Russian Ministry of Finance, and also taking into account the opinion of the Central Bank of Russia. Federal budget funds received by commercial banks from the Russian Ministry of Finance are allocated to borrowers (developers) on a contractual basis.
To conclude contracts for the receipt of these funds, borrowers (developers) submit the following documents to banks:
1) extracts from the list of construction projects and facilities for state federal needs;
2) government contracts (contracts);
3) calculations substantiating the timing of the output of the commissioned production facilities to the design capacity;
4) calculations of the terms for the return of issued funds and interest on them;
5) the conclusion of the state non-departmental expertise on project documentation;
6) documents confirming the solvency of the borrower and the repayment of funds.
Federal budget funds are provided on a repayable basis to borrowers secured by movable and immovable property in accordance with the pledge legislation of Russia.
Federal budget funds received by commercial banks and provided on a reimbursable basis may be used strictly for their intended purpose only to finance capital investments for state federal needs.
The return by borrowers (developers) of federal budget funds provided on a repayable basis is carried out within the time limits determined by the concluded agreements. The Ministry of Finance of the Russian Federation returns the loan (together with accrued interest) to the Central Bank of Russia. Interest for the use of federal budget funds provided on a repayable basis is accrued from the date of their issuance to borrowers in accordance with the concluded agreements. The interest rate is set in an agreement between the Russian Ministry of Finance and the Central Bank of Russia.
Financing and lending for the construction of objects of mixed investment at the expense of the federal budget, own and other sources are carried out in the manner established for the provision of budgetary appropriations.
Financing of capital investments at the expense of investors' own funds is carried out by agreement of the parties. Construction partners independently determine the procedure for customers (developers) to deposit their own funds to bank accounts to finance capital investments and mutual settlements. Forms of payment for construction and installation works, supplies of material, energy resources and services for the construction of facilities are determined by work contracts (contracts). They are concluded by customers (developers) and contractors for the entire period of construction.
Calculations for construction objects are carried out according to contract value. The contractual value (price) of the construction object can be calculated:
In accordance with the project, taking into account the special conditions in the construction contract (fixed price);
At the actual cost of construction, with the addition of the agreed value of the contractor's profit (open price).
In modern conditions, enterprises of various forms of ownership independently develop investment programs and ensure their implementation with appropriate material and financial resources. The plan for the formation of investments is not a directive document for the enterprise, but determines the strategy of its financial capabilities for the coming year.
When developing a strategy for the formation of investment resources, five main methods of financing investment programs and projects are usually considered:
Self-financing;
Shareholding (issue of own shares);
Credit financing;
Investment leasing and selenge;
Combined (mixed) financing.
The most promising is the method of self-financing (self-investment). To determine the share of own funds in the total investment, you can use the self-financing ratio.
Ksf \u003d Ss / I,
where Сс - own funds of the enterprise (net profit and depreciation), р.; I is the total amount of investments, p.
The recommended value of the indicator is not lower than 0.51 (51%). At a lower value, the enterprise loses its financial independence in relation to external sources of financing (borrowed and borrowed funds).
Shareholding as a method of financing investments is usually used for the implementation of large-scale projects with sectoral or regional diversification of investment activities (for example, in the oil and gas complex of Russia).
Loan financing usually acts in two forms: in the form of obtaining long-term bank loans for the implementation of specific projects and bonded loans.
Bond loans can be issued only by well-known joint-stock companies (corporations or financial and industrial groups), the solvency of which is not in doubt among investors (creditors).
Leasing and investment selenge are used when there is a lack of own funds for real investments, as well as for capital investments in projects with a short operating period or with a high degree of technology variability.
Leasing allows the enterprise-lessee to quickly acquire the equipment it needs, without simultaneously diverting significant financial resources from its turnover.
Investment property- a new form of raising funds used by a number of companies in Russia. It is a specific form of obligation, consisting in the transfer by the owner (legal entity or citizen) of the rights to use and dispose of his property for a period of time for a certain fee. Such property can be both non-current assets (buildings, structures, equipment) and current assets (cash, securities, etc.). In this case, the owner remains the owner of the leased property and may return it upon request. The Seleng Company attracts and freely uses, at its own discretion, the property and individual property rights of legal entities and citizens. Therefore, in terms of the form of financing, the investment seleng is close to banking.
Selenge is an effective method of financing various areas of economic activity, including investment. With the help of the Selenga, financial assistance is provided to companies experiencing an acute shortage of various types of resources, including cash. Therefore, in foreign practice, the seleng has become one of the important methods of financing investments in various areas of business.
Mixed financing is based on various combinations of these methods and can be implemented in all forms of investment.
Long-term lending of capital investments
The need for long-term lending of capital investments arises from the shortage of own funds that often occurs in enterprises, which is due to the discrepancy between the available financial resources and the need for them for expanded reproduction of fixed capital. In this case, there are long-term credit relations between the borrower and the lender (bank).
Long-term loans from commercial banks are now being attracted to real and fast-realizing projects with a high rate of return (yield) on investments. Unlike budgetary funds, attracting long-term bank loans for capital investments increases the responsibility of borrowers for their rational use due to the repayment and payment of borrowed funds. Only large commercial banks are now able to engage in long-term lending of capital investments, but subject to the provision of tax benefits to them, because with high inflation there are no criteria for the expediency of credited measures. Commercial banks in Russia in modern conditions are unlikely to be engaged in long-term lending for the construction of large facilities without benefits that compensate for losses compared to the results of short-term lending. The exception is those provided by several banks to one reliable borrower for the implementation of a highly profitable project (if the rate of return on it exceeds the loan interest rate).
The objects of bank lending for capital investments enterprises of all forms of ownership are the costs:
1. for the construction, expansion and reconstruction of industrial and non-industrial facilities;
2. acquisition of movable and immovable property (buildings, equipment, etc.);
3. formation of new enterprises with the participation of foreign investors;
4. creation of scientific and technical products, intellectual values and other objects of property.
The procedure for providing, processing and repaying long-term loans (for a period of more than one year) is regulated by the rules of banks and loan agreements with borrowers.
When setting the terms and frequency of repayment of a long-term loan, the bank takes into account:
Cost recovery due to the net profit of the borrower;
The solvency of the enterprise;
Level of credit risk;
Opportunities to accelerate the turnover of credit resources.
To obtain a long-term loan, the borrower submits to the bank documents characterizing his solvency:
balance sheet as of the last reporting date;
report about incomes and material losses;
feasibility studies and calculations to them, confirming the effectiveness and payback of costs for credited activities and projects.
The amounts of loans received in rubles are credited to the settlement account or special bank accounts, as well as to the foreign currency account (when receiving a loan in foreign currency).
The long-term loan pays for construction and installation works, supplies of equipment, design products and other resources for construction. The return of borrowed funds for newly started construction projects and facilities begins after they are put into operation within the terms established by the agreements. For facilities being built at operating enterprises, the repayment of loans begins before the commissioning of these facilities.
Interest for the use of credit resources is accrued from the date of their provision in accordance with the concluded agreements between enterprises and banks. Repayment of interest for the use of borrowed funds is carried out:
A) for newly started construction projects and facilities - after they are put into operation within the time limits specified by the loan agreements;
B) for facilities constructed at existing enterprises - monthly from the date of receipt of these funds.
Conditions for opening capital investment financing
Proper organization and planning of capital investments are important conditions for opening the procedure for their financing. Capital investments are planned both for the country as a whole and for industries and enterprises. A number of organizations can participate in the development of large capital investments: the customer, the contractor, the general designer and supplier organizations.
A contractor is an organization that prepares and provides construction for itself or for a future consumer. The supplier organization enters into a supply contract for construction. The general designer is an organization authorized to carry out design work and has concluded an agreement on the development of project documentation.
The main document is the preliminary project of capital investments. It should contain the name of the object under construction, the scheme of binding to the terrain, the justification and purpose of construction, requirements for efficiency and a comprehensive description of the technical and economic level of construction. This includes the expected production technology, total construction costs and additional investments, the required number of employees, the technical and economic characteristics of the product, the need for raw materials, energy and water, the need for transport due to the location of the facility. An important part of the preliminary design is the assessment of the impact of the facility under construction on the environment. The preliminary project specifies the terms for preparation of project documentation, start of construction and commissioning of the facility.
The preliminary design forms the basis for the development of a project assignment, in which capital investments are specifically allocated and justified by individual items of expenditure and functions. The design assignment defines the requirements for the technical, economic and architectural levels of construction and indicates its timing. The project assignment contains an economic part, which should reflect the overall efficiency of construction.
During the development of the project assignment, it is necessary to coordinate its individual points with the regulatory authorities. These are, in particular, issues of industrial hygiene, fire safety, labor protection and safety, environmental protection, etc. The design task must be agreed with the state committees of the appropriate level.
The project documentation is divided into an explanatory note and a working draft. For smaller projects, a project can be developed consisting of one part, having the structure of an explanatory note, which indicates the details of the working project. In these cases, the simplest project documentation is developed, limited to a description of the progress of work, the necessary drawings, a list of materials and an estimate.
Financing the repair of fixed assets
Repair is one of the forms of reproduction of fixed assets (funds), which wear out and lose their performance over time.
Repair is understood as a set of operations to restore the serviceability or performance of tools or their components, taking into account the use of opportunities to improve their technical parameters (productivity, power, etc.). In accordance with the methodology adopted in Russia, the repair of buildings, structures, equipment and other fixed assets is divided into capital and current. A major overhaul is performed to restore the health of the resource of an inventory object with the replacement or restoration of any of its parts, including the basic ones. Current repair is carried out to ensure or restore the operability of the product and consists in the replacement of its individual parts.
The enterprise independently develops a plan for the overhaul of fixed assets for the coming year and schedules for repair work on individual inventory items. The basis for drawing up such a plan is the cost estimate and technical documentation, which takes into account the current norms, prices and tariffs. The capital repair plan and cost estimates are approved by the head of the enterprise and serve as the basis for financing repair work.
The enterprise has the right to independently choose the method of attributing the costs associated with repairs to production and distribution costs:
Include in the cost of the actual costs of repairs after their implementation;
Create a repair fund (cash reserve) at the expense of the cost price;
Attribute, if necessary, the actual costs of repairs to deferred expenses with their subsequent monthly write-off to the cost of products (works, services).
When carrying out repair work in a contractual way, it is advisable to cover the costs of repairs at the expense of the repair fund created at the enterprise. It is designed to more evenly incorporate repair costs into product costs to prevent significant fluctuations in profit margins within a year.
The repair fund is formed at the expense of deductions included monthly in the cost of production according to the standards established by the enterprise itself as a percentage of the book value of fixed assets. In this case, the actual repair costs, as the contractor submits invoices for the repair work performed, are reimbursed from the repair fund.
Issuance of advance payments to contractors, payment for repair work in the case of a contractual method of their production are carried out from the settlement account of the enterprise in the presence of an agreement concluded with the contractor and an act of acceptance of work performed 2 .
The efficiency of capital investments
capital investment are called investments aimed at the construction or acquisition of objects fixed assets (funds). Capital investments are otherwise referred to as investments in fixed assets).
Capital investments can be used to create new objects of fixed assets or to reconstruct their existing objects.
There is an objective trend, according to which in dynamics, i.e. over time, the proportion of capital investments that are directed to reconstruction, including the technical re-equipment of production, in the total amount of capital investments is constantly increasing.
In this regard, the proportion of capital investments allocated for the construction of new fixed assets is decreasing accordingly. The fact is that reconstruction is more cost-effective than new construction, since it requires significantly lower costs and is carried out in a shorter time than the construction of new fixed assets.
Modern enterprises operate in a market economy, and to ensure their effective operation, it is necessary to have certain ones. When creating any enterprise, as well as in the process of strategic planning, specific sources of financial resources formation and their volume are determined.
The financial resources of the enterprise are divided into two large groups:
According to the sources of formation financial resources enterprises are also divided into several groups:
Authorized fund (capital) is the amount of capital required to start a business. Its size is determined by the enterprise.
Income from activities represent all the income received by the enterprise during its operation through the sale of its products, performance of work or provision of services.
Depreciation deductions represent the amount of cash deductions received by the enterprise when selling its products as part of the production.
Credit- these are funds provided to the enterprise on the principles of their return and payment of a certain percentage for their use. can exist in two forms: commodity (when the company is provided with goods with a deferred payment for them) and monetary (when the company receives a certain amount of money for a certain period of time and at a certain percentage).
Subsidies- this is financial assistance, which is provided to the enterprise by both state and non-state bodies or enterprises in cash and in kind.
Investments- this is a long-term investment () in entrepreneurial activity with the aim of obtaining. An investor is a business entity that invests money.
Investment is the process of investing capital (cash) in a certain area of production.
Investments of the enterprise according to the source of their origin can be classified into domestic (internal) and foreign (external).
Internal investments are:
External investments can be:
They are periodically carried out long-term capital expenditures for the reproduction and objects of the social infrastructure of the enterprise. Capital investments in the fixed capital of an enterprise represent the costs of construction, reconstruction, purchase of real estate, purchase of machinery and equipment. This form of investment is the main one for enterprises and ensures the introduction of new technologies, the development and release of new products, the development of new markets, as well as an increase in the efficiency and market value of the enterprise.
By functional orientation, capital investments are classified as follows:
The ratio between the elements of capital costs is called their elemental-technological structure. The efficiency ratio of any investment project, including a capital investment project, can be calculated as the ratio of the amount of profit growth to the cost of the project being implemented. If there are alternative opportunities for investment activities (several options), the reduced costs must be calculated using the formula:
Z = C i + E n * K i -> minwhere C i - current costs (cost) for the i-th project;
E n - normative coefficient investment efficiency;
K i - capital investments for the i-th project.
Minimization of reduced costs is a reflection of the strategy of any business entity aimed at reducing them. Thus, performing calculations according to the above formula, it is advisable for the enterprise to accept the investment option for which the total reduced costs will be the smallest.
When implementing, all possible investment options should be adjusted for the degree of risk for a particular project, which is expressed in the implementation of adverse events, as a result of which a business entity may suffer certain losses (monetary, material, reputational, socio-psychological, etc.) .
