Gross Investment (2017 Update)

Gross Investment

Gross Investment

 

The theory of economic development or rather in that its part which refers to theory of investment. Capital stock by the term gross investment is understood that part of the domestic product, which in the process of its final distribution and use is not spent. This is in terms of personal and general consumption. But it is also use for maintenance of existing, replace worn and the construction of new fixed assets. Furthermore, an increase in working capital funds.

If the concept of gross investment and depreciation is the conceptual meaning of the United Nations, then the category of major maintenance exclude from their scope. In this case, namely, the notion of gross investment means that part domestic product, which is underway its final distribution. In addition, replacement of worn out parts and construction of new fixed and increase working capital funds. Such conception and interpretation of the concept of gross investments represented today in the great the majority of UN member states.

 

Concept

As for the concept of gross investment in working capital fund, it should be noted that there is no practical difference between gross and net of treatment and interpretation concept of investment in working capital fund.

It is not the existence of substantial differences between gross and net regarding investments in the working capital fund is derived from the character of working capital funds. Namely, if under the investment in working capital fund, as already mentioned, we mean those investments that are spent on increasing inventories, it is clear that, given the differences in basic economic the characteristics of the of fixed and working capital funds, we can not talk about gross investments and net investments in working capital fund, but in this case appropriate value and size are taken gross for net.

 

Economic Structure

The economic structure of the gross investments is determine by the relationship of depreciation, replacement, net investments and new investments. It is the economic structure of gross investment increase share amortization of net investment, and vice versa.

Accordingly, the gross investments are not a homogeneous economic category. Instead it is a heterogeneous category that entails free to factors and factors expanded reproduction.

Therefore, the statistical and economic analyzes of the size of the gross investments can show only as a positive or flat zero. Negative values category gross investment can not have a specific size of investment. We can choose to or not to invest, but we can not invest in negative.

In the event of such an occurrence, that the total gross weight does not include general in its economic structure of the investments financed from the current distribution of national income, but only investments that are funded by the depreciation, then gross investments equal depreciation, and net investment equal to zero.

However, if in the context of an accounting period will not have any investment activity after, means that gross investments are zero. The category net investment will then be negative size equal to the size of the corresponding economic depreciation. However, understandably with the opposite (negative) sign. Cumulative gross investment does not indicate a theory of investments and fixed assets some specific term and does not have a very specific meaning. Unless it is receive as a measure of the total allocations for capital expenditures within the period under review. The ratio between the total gross investment and the corresponding domestic product in the accounting period under review is call the theory of economic development. It is also rate investment.

That relationship in combination with a starting capital coefficient of statistical and documentary basis many econometric models development. The macro economic point of view is the rate of investment and inversely with the value of capital coefficient. In this regard it should be noted that the construction of these econometric models growth in addition to the gross investments relevant and those categories of investments that are at their economic content homogeneous and, in general are elements and expanded playback.

 

In Conclusion

However, regardless of the fact that the gross investment in its economic content heterogeneous category (which in itself includes both free elements and elements expanded reproduction). In economic analysis and planning of gross investment still represent the starting statistical documents or analytical basis. This is quite understandable if we bear in mind that virtually all functional dependencies in the process accumulate fixed assets formed as a function of current gross investment.


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