Financial investments are investments in securities of various issuers. This is a form of disposal of the temporarily free capital of an enterprise, which has its own classification and other unique features.
Key features of financial investments
Acting as an active form of effective distribution of the organization's free capital, financial investments have the following features:
- are carried out at the later stages of the development of an enterprise that has already satisfied its needs for real investments;
- can be held in the country or abroad;
- represent an independent type of economic activity, allowing to solve strategic tasks by investing in statutory funds and controlling stakes in various enterprises;
- contribute to a fairly quick and low-cost implementation of specific strategic goals for the development of the enterprise;
- allow you to direct funds to various sectors of the economy, forming a conservative or aggressive investment policy;
- require less time to implement management decisions in comparison with real projects and investments.
Classification of financial investments
The corresponding type of financial investment is classified:
- By forms of ownership of financial resources.
- By the nature of participation in investment.
- By the investment period.
- On a regional basis.
There are public and private financial investments depending on the form of ownership. The first of them are investments made by public authorities and management with the attraction of funds from budgetary and extrabudgetary funds, credit organizations, state enterprises and institutions at the expense of their own and borrowed funds.
Private financial investments are made by citizens, business associations, various non-state enterprises, societies and unions, as well as legal entities acting on collective property rights. In addition, they distinguish foreign financial investments received from foreign citizens and organizations, as well as joint investments, which are investments from several civil or legal entities.
By the nature of participation in the investment process, direct and portfolio investments are distinguished. The first are business transactions with the contribution of funds or property to the statutory fund of an organization in exchange for corporate rights issued by it. The second are business transactions for the acquisition of derivatives, securities and other financial assets on the stock market.
There are short-term and long-term financial instruments depending on the investment period. Short-term ones involve investments for a period not exceeding one year. This includes the acquisition of short-term savings certificates, bills of exchange, government securities, etc. All this refers to the assets of the money market and is intended for the use of temporarily free financial resources in order to quickly generate income. As for long-term investments, they consist in the purchase of a share of the authorized capital of other organizations, including shares, interest-bearing bonds. This also includes obtaining financial loans and credits for a period exceeding one year.
On a regional basis, one can single out financial investments carried out within the state and abroad. The first of them, also called internal investments, are investments in those investment objects that are located on the territory of the state. Foreign financial investments are investments in investment objects located outside the country, including the purchase of shares, bonds and various other financial instruments of foreign companies and states.
