Types of investment
investment expenses is the sum of all costs of the company aimed at its normal functioning. The volume of investment costs proportionally affects the level of profitability of the project. Accordingly, the smaller the expense, the greater the income.
In general terms, in terms of types of costs distinguish between real (capital-forming) and financial investments.
Real investments can be fixed assets, real estate, stocks, assets, R&D, investments in personnel (training and professional development). It is important to note that investments in professional development of employees and new developments can be attributed to investments only in the implementation of investment projects.
Capital investments can be directed towards new construction, as well as the expansion, reconstruction or rearmament of enterprises. The
objects of financial investments can be securities (stocks, bonds, etc.), deposits, foreign currency, dragmetals, etc.
Distinguish gross and private investment costs. Gross is the volume of real investments for a certain period. These costs are realized from own funds (depreciation, gains) raised (from equity issuance) or leveraged funds (loans and bonds). Net investments, as opposed to gross, decreased by the amount of depreciation.
Composition of investment costs
Included in the composition of investment costs are fixed and net working capital. Core capital includes the costs of infrastructure and fixed assets. To pure – the costs of maintaining the stability of production, they are also called operating costs. It is
customary to classify costs as direct, indirect, explicit (implicit) and non-recoverable. Direct costs are directly related to the implementation of investment projects. These are, inter alia, expenses for the purchase and commissioning of equipment, transportation, installation of products or raw materials.
Indirect costs are associated with the creation of an external enabling environment for the organization of production. It is, for example, legal, accounting support of the project, payment of services of contractors. Accounting for these costs reduces the profitability of the project.
Implicit or hidden costs occur when there is a surplus of production funds that are not involved in generating income.
If the costs were not accounted for in the investment project, they are not recoverable. For example, it’s the cost of developing a business plan or conducting marketing research.
The composition of costs in capital-forming and financial investments varies. In the first case, the following types of expenses are allocated:
– preparation of project documentation;
– obtaining of permits, licenses;
– acquisition and construction of real estate; $
– purchase of equipment, delivery, installation and commissioning
– mandatory tax payments and customs duties
– other expenses – eg connection to power grids.
When making financial investments, costs include expenses for purchasing securities, transaction expenses (spreads and commissions), encouragement to the manager of the personal account, tax payments. Also, the investor may have costs associated with the acquisition of market analytics, payment of consulting services.