Investments and Financial Relations

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Investments and Financial Relations

• Investments are an important component of financial relations.
• Covers public and private investments.

Investment Concepts

• Under central planning, investments were viewed simplistically as expenditures for new fixed assets or reconstruction, modernization, and repair of existing ones.
• A broader definition includes "placing sums of money in the economic, social-cultural, administrative, military, etc. domains to ensure the technical-material base and labor necessary for carrying out and expanding this activity."

Economic Transition

• As Romania transitioned to a market economy, economic concepts had to be re-evaluated in line with both Romanian and international developments.
• The concept of investment is complex and lacks a universally accepted definition in international literature and financial practice.

Investment Characteristics

• A resource can be identified by its nature and volume.
• Expenditures have a specific lifespan with defined phases.
• Projects must be efficient, ensuring fund recovery and profit.
• Projects entail risks due to potential changes in projected parameters.

Investment vs. Consumption

• Consumption spending reduces wealth, while investment involves acquiring assets to generate future liquidity flows.

Economic Practices

• Accounting approach: investments are tangible or intangible assets that remain constant over a year, emphasizing the financial impact.
• Economic approach: investments are resource consumption in hopes of future economic effects that exceed the initial cost, emphasizing efficiency.
• Financial approach: investments are expenses that generate superior returns or savings over an extended period, with amortization occurring over several years.

Other Perspectives

• For central or local administrations, investments may not always aim for profit, which is not captured by the accounting, economic or financial approach.
• Investment may involve purchasing goods or elements that constitute capital, whether or not the investment increases wealth.
• Leasing, while financially a form of investment financing, is not considered an investment in accounting or legal terms.

Conceptual Elements

• Investment should be understood as a current expense aimed at obtaining future effects amid risk and uncertainty.
• Four essential elements should be considered: The subject (investor), the object (asset being constructed), the cost (financial effort), and the effects (economic and financial results).

Diverse Interpretations

• The concept of investment is often identified with an expenditure, however it includes other interpretations: -placement, action, work, activity, process.
• Placement of funds covers only part of the meaning and reflects the destination of funds.

Recent Definitions

• Investments are defined as factor linking the past, presence and future, with investment put into operation in the future.
• Another stated investment is "a permanent allocation (often for an indefinite period) of capital, in the acquisition of fixed and/or financial assets, which allow the development of profitable activities, superior to the normal rate of return covering the risks assumed".

Common Traits

• Investments entail converting monetary availabilities into expenses, whether for equipment or securities.
• Investments require effort, anticipating diverse positive effects, often in the form of increased profits, which remain uncertain.
• Investments involve "deactivation" of current resources, with costs expected to be covered by future net effects.

Direct Investment

• Direct investment is defined as "participation in the constitution or expansion of a company in any of the legal forms provided by law, the acquisition of shares or social parts of a commercial company, with the exception of portfolio investments."
• Direct investment can be done through aport, in cash, in the national currency or in convertible currency, or non cash.

Portfolio Investment

• Portfolio investments are "the acquisition of securities on organized and regulated capital markets and which do not allow direct participation in the administration of the commercial company."

Investment Classification

• Investment should be classified so it may respond to needs, related to foundation and economic analysis of projects.

Investment Nature Breakdown

• Corporate investments are tangible.
• Non-corporate investments are intangible.
• Financial investments involve placement in assets.

Corporate Investments Deconstructed

• Corporate investments include equipment, installation, and those related to mounting and replacing decommissioned ones.
• They are further divided into proper investments and assimilated investments (exploration, geological work, design, forestation, land improvement, site organizations, etc.).

Non-Corporate Investments Described

• Non-corporate (intangible) investments include R&D, purchasing or designing software, and improving production processes.

Financial Investments Exemplified

• Financial investments consist of long-term monetary placements in debt or equity securities, issued by firms, banks, or governments, seeking additional income as interest, dividends, etc.
• These investments have no wear or amortization, and can be sold in specific marketplaces.

Investment Concrete Structural Breakdown

• Construction-assembly work
• Equipment acquisitions that involve or do not involve mounting
• Geological exploration jobs
• Spendings

Investment Purpose Grouping

• Replacement investments are for replacing decommissioned assets.
• Expansion investments materialize by extending existing sections.
• Innovation and modernization investments involve improvement of technological processess.
• Strategic investments are aimed at preventing risks of technological, economic or financial nature.

Investment Characteristics Classification

• New Constructions
• Reconstructions
• Repairs
• Developments
• Re-tooling
• Re-tehnologizing and placements.

Investment Destination Classification

• Productive (fixed assets with productive destination)
• Unproductive (social-cultural)
• Offensive (increase fixed capital)
• Defensive (security measures)

Funding Source Classification

• Public investments are funded by the state or local budgets for services/social-cultural efforts.
• Autonomous investments are carried out by companies using their own sources.
• Private investments are conducted by private businesses either from own sources or sourced on the capital market

Risk Classification

• Investments with risk similar to company as a whole, replacement projects.
• Investments with medium risk, expansions.
• Investments with high risk, research.
• Investments with "white risk," dedicated to improving of labour conditions.
• Investments with an “imposed risk”.

Structure Characteristics

• Direct investments: Includes supporting components
• Collateral investments: Supports function
• Related Investments: Supporting existing base investments

Treasury

• One-Time Investments: Single expenditure with a single entry financial or agricultural
• Mutiple-Intake Investments: Inustrial Equipment
• Complex Industry Investments: Complex assemblies
• Industrial Investments: Escheloned, on duration

Investments Classified

• Net Investmens: Devolopement of capital
• Gross investment: Includes replacement

Real Capital

• Net investments represent investments to increase real technical capital volume funded by income forming net capital.
• Gross investments, encompassing net and replacement investments for capital goods reproduction using amortization as funding source.

De-Investment Defined

• When gross investments are less than replacement investments, real technical capital decreases, resulting in de-investment.
• Classifying investments based on all mentioned facilitates analysis/decision-making.

National Economics Importance

• Investments ensure the establishment, regeneration, and growing wealth of nations.

Growth and Economy

• Investments are important to dynamics, restructuring and modernization, so they must maintain economical assurance. There is a connection investment and the economy with these traits:
• Structural changes
• Incorporating of capital
• Creates a connection to economy
• Agentes economicos

The State

• Investing at a national level does not concern the economic effect, but functions and logistics of government. The governenmt can incentivize projects.
• Lower spendings will decrease the economic effect, so subventions are in place.

Post-December Changes

• These affect the industry with planning. The new investmeents focused on global economy and shifted in location.

Investment and Growth

• Investment are defined as, going foward, "the form under which all the quantitative, structural and qualitative transformations that take place within economic life over a long period are manifested, in the sense of increased aggregate indicators.”
• Economic devolpment means transformation of life along with fabication, structure, economics etc.

Strategies and Increase

• The growth is connected back from 1939 as a result of economy, and expanded production.

The Formula

• This shows there should be a balance, which is related to income, consumption and investerments between revenue and consumption, which is also E = I.
• Investment rates determines savings by how much will determine it and change it.

Growth

• More investment is needed to increase the Y, resulting in 15 mil versus 5 the value should be M is 3. This must be a positive.

Formula For M

• If the object has the growing with M, with its investment with a positive. The multiplicatory must be as full with the M's,

Harrod's Model

• Using Keves, Harrod formed this to explain the connection of caputalaity to do with the shifting in science. This should also be equal to zero according to Harrods.

A K Y

• They should be the best the capital invested.

Domar Model

• This shows a connection between value and the new value of productiin has no change with the new science and tech..

J C Larkk

• That will produce the investmenbt. Now you pot that in function to produce it.

Allocating Reasources

• At level one or micro you will want to pick what will affect everything at the lowest cost. Then define the principal corelations of the economy and the need to build that up.

Optimization

• They are not set up too well then have to come from a few different processes like minimizing cost, to come from data.

Programs

• If the data or activity that is changed then programming is needed

Statu

• This is only for a few thing for example.
• This must be done in double directory and the formula is needed.

Example

• All this was good for everything.

Linear Programming

• Use linear functions to produce what might come for next plan, make certain assumptions.
• These methods need to be changed.

Stup

1. Stabilization is needed
2. Indicator are importang 3.. Set up to get what is needed