Investment costs are the total costs associated with the implementation of business projects. Their types and composition varies depending on the specific project.
Types of investments
Investment expenses are the sum of all expenses of the company aimed at its normal functioning. The volume of investment costs proportionally affects the level of profitability of the project. Accordingly, the less expenses, the more income.
In general, from the point of view of types of costs, real (capital-forming) and financial investments are distinguished.
The objects of real investment can be fixed assets, real estate, stocks, assets, research and development, investments in personnel (training and advanced training). It is important to note that investments in improving the professional level of employees and new developments can be attributed to investments only in the implementation of investment projects.
Capital investments can be directed to new construction and expansion, reconstruction or re-equipment of enterprises.
The objects of financial investments can be securities (stocks, bonds, etc.), deposits, foreign currency, precious metals, etc.
Distinguish between gross and private investment costs. Gross is the amount of real investment over a given period. These costs are carried out at the expense of own funds (depreciation, profit), attracted (from the issue of shares) or borrowed funds (loans and bonds). Net investment, in contrast to gross investment, is reduced by the amount of depreciation.
Composition of investment costs
The investment costs include fixed and net working capital. Fixed capital includes the cost of creating infrastructure and fixed assets. To the net - the costs of maintaining the stability of production, they are also called operating costs.
It is accepted to classify expenses into direct, indirect, explicit (implicit) and non-reimbursable. Direct costs are directly related to the implementation of investment projects. These are, in particular, the costs of purchasing and commissioning equipment, transportation, installation of products or raw materials.
Indirect costs are associated with the creation of external favorable conditions for the organization of production. These are, for example, legal, accounting support of the project, payment for contractors' services. Accounting for these costs reduces the profitability of the project.
Implicit or hidden costs arise when there is a surplus of productive assets that are not involved in generating income.
If the expenses were not taken into account in the investment project, they are not reimbursed. For example, these are the costs of developing a business plan or conducting market research.
The composition of costs for capital and financial investments is different. In the first case, the following types of expenses are distinguished:
- R&D;
- preparation of project documentation;
- obtaining permits, licenses;
- acquisition and construction of real estate;
- purchase of equipment, its delivery, installation and commissioning;
- mandatory tax payments and customs duties;
- other expenses - for example, connection to the power grid.
When making financial investments, the costs include expenses for the purchase of securities, transaction costs (spreads and commissions), incentives for the manager of a personal account, tax payments. Also, the investor may incur costs associated with the acquisition of market analytics, payment for consulting services.
