As a result of studying the chapter, the student must:
• Know the fundamentals of the investment process, its fundamental properties;
• have an understanding of the investment project, its classification, criteria and evaluation methods;
• own skills to assess the investment quality of securities;
• be able to form and manage an investment portfolio of securities of various types;
• Know the peculiarities of state regulation of investment activity;
• have the skills to form investment strategies to attract foreign investment;
• Know the structure and composition of participants in financial markets.
Investment process: concept, types of investments and participants
Investment Process is the sequence of managing all aspects of investment activity. The investment process is a complex work package, which includes the following main stages: the definition of the investment object, financing of capital investments and monitoring their implementation.
The mechanism of the investment process is based on the rationale and implementation of the most effective forms of capital investment aimed at expanding the economic potential of the enterprise. To implement investment activities, they develop an investment policy that is part of the enterprise development strategy and the general policy of managing its profit. It consists in the selection and implementation of the most effective forms of capital investment in order to expand the volume of operating activities and generate investment profit. The investment process is always connected with two factors: time and risk. The risk is caused by the inadequacy of the desired capital growth in the current period and compensation for losses from inflation in the forthcoming period. The main form of the investment process is investment.
Investment (from the Latin invest - to invest) - placing capital in any legally independent enterprises for a long time (more than one year) in order to obtain profit or acquire influence on companies.> Investments are cash, targeted bank deposits, shares, securities, machinery, equipment, technology, loans, any property and property rights, intellectual values invested in business objects in order to obtain additional capital and achieve a positive economic and social effect.
In business, the following investments in physical assets, financial assets, intangible assets, portfolio assets are distinguished in enlarged form.
Investments in physical assets (real investments) are long-term investments in the creation of assets related to the operation of the enterprise.
Investments in financial assets represent an investment of capital in various financial instruments, as well as in the assets of other enterprises.
To investments in intangible assets include objects of intellectual property, including: rights to the results of intellectual activity; patents; license; the right to use land plots, natural resources; software products, monopoly rights; privilege; trade marks; trademarks, etc.
Portfolio investments - investing in securities (stocks, bonds, etc.) or contracts. The peculiarity of this type of investment is that, due to their limited size, they can not provide control over the joint-stock company to their owners, and therefore do not have a significant effect on the effectiveness and purposefulness of their use.
On acquired ownership, investments are divided into direct and indirect. Direct investments - is a capital investment directly in the production of any product, including the purchase, formation or expansion of enterprise funds, the modernization of fixed assets. They, as a rule, provide investors with actual control over the invested object. Indirect investments represent investments in a portfolio of securities or property values.
The period of investment investment distinguishes between short-term and long-term investments. Short-term investments - investments of free capital (savings) for up to one year (short-term deposits, purchase of short-term savings certificates, working capital loans, etc.). Long-term investments are carried out by investing capital (savings) for a period of use of more than one year.
According to the forms of ownership of investors, the following investments are distinguished:
- private (investments of the population and enterprises of non-state ownership);
- state (investments in the economy from the budget, off-budget funds, state loans, as well as investments from profit and depreciation charges of state enterprises);
- foreign (investments by non-residents in the objects and financial instruments of another state);
- joint (investments by United States entities together with investors from other countries).
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