investment

Examples of investment in the following topics:

• Determinants of investment

  • Economic investment, also referred to as capital investment, is different from and should not be confused with financial investment.
  • An example of non-residential fixed investment is investment in human capital, which includes additional schooling or training.
  • Inventory investment: The accumulation of goods or inventories.
  • To encourage investment, interest rates need to be lower .
  • Even when a firm uses its own funds on an investment, there is an opportunity cost of using the funds for investment, instead of lending out the money for interest.

• Cash Flow from Investing

  • Cash flow from investing results from activities related to the purchase or sale of assets or investments made by the company.
  • One of the components of the cash flow statement is the cash flow from investing .
  • An investing activity is anything that has to do with changes in non-current assets -- including property and equipment, and investment of cash into shares of stock, foreign currency, or government bonds -- and return on investment -- including dividends from investment in other entities and gains from sale of non-current assets.
  • The investing activity was undertaken by the shareholder.
  • Some examples of investment activity from the company's perspective would include:

• Reporting Investing Activities

  • An investing activity is anything that has to do with changes in non-current assets -- including property and equipment, and investment of cash into shares of stock, foreign currency, or government bonds -- and return on investment -- including dividends from investment in other entities and gains from sale of non-current assets.
  • These activities are represented in the investing income part of the income statement.
  • A dividend is often thought of as a payment to those who invested in the company by buying its stock.
  • However, this cash flow is not representative of an investing activity on the part of the company.
  • The sale of a factory would be an example of a cash inflow from investment.

• Return on Investment

  • Return on investment (ROI) is one way of considering profits in relation to capital invested.
  • Return on investment (ROI) is one way of considering profits in relation to capital invested.
  • The purpose of the "return on investment" metric is to measure per-period rates of return on dollars invested in an economic entity.
  • Return on investment (%) = Net profit ($) / Investment ($) × 100
  • Return on investment = (gain from investment - cost of investment) / cost of investment

• Return on Investment

  • Return on investment is one way of considering profits in relation to the capital invested.
  • Hence, it is important to keep all investments in mind when setting prices.
  • The purpose of the return on investment metric is to measure per period rates of return on dollars invested in an economic entity.
  • Return on investment is often compared to expected (or required) rates of return on dollars invested.
  • This chart shows the rate of return on investments after training teachers.

• Shifts in investment due to shocks

  • Positive and negative demand shocks directly impact investment; increases in demand encourage higher investment while less demand lowers investment.
  • Demand shocks directly impact investment.
  • When income increases it encourages higher investment.
  • Demand shocks only temporarily increase or decrease consumer spending and investment.
  • Although demand shocks can have a positive impact on investment, the substantial swing investment usually causes an instability to results in decreased investment once the initial positive tendencies subside.

• Incentivizing Saving and Investment

  • Both savings and investment affect the overall economy.
  • Broadly, each incentive adjusts the cost of saving or investing.
  • We will discuss two main ways to affect the savings and investment rates here.
  • High interest rates encourage savings and discourage investment.
  • Low interest rates encourage investment and discourage savings.

• Assessing Fair Value

  • Realized gains and losses are included in income; unrealized amounts are included in income (trading investments) or in other comprehensive income (available-for-sale investments).
  • The investment is reported at fair value on the balance sheet.
  • The original investment is recorded at its investment cost.
  • this is higher or lower than the existing balance in the investment account.
  • The investment is reported at fair value on the balance sheet.

• Direct Investment

  • Foreign direct investment (FDI) is investment into production in a country by a company located in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.
  • FDI is in contrast to portfolio investment which is a passive investment in the securities of another country, such as stocks and bonds.
  • However, identifying the conditions that best attract such investment flow is difficult, since foreign investment varies greatly across countries and over time.
  • Sao Paulo, Brazil, home to a growing middle class and significant direct investments.
  • Explain the effects of foreign direct investment (FDI) for the investor and the host country

• Defining the Payback Method

  • The payback method is a method of evaluating a project by measuring the time it will take to recover the initial investment.
  • A $1000 investment which returned $500 per year would have a two year payback period.
  • In capital budgeting, the payback period refers to the period of time required for the return on an investment to "repay" the sum of the original investment.
  • When used carefully to compare similar investments, it can be quite useful.
  • The payback method does not specify any required comparison to other investments or even to not making an investment .