Difference Between Financial Investment And Economic Investment by Sofiya Machulskaya

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Sofiya Machulskaya

The difference between financial investment and economic investment is explained here, and the benefits of which type of investment are good for companies.

The financial investment consists of investing in strategic and non-tangible assets so that the business of a company or an individual flourishes.

It consists of allocating resources in a financial asset such as a bank account, stocks, investment funds, currencies, and derivatives. 

Also, purchases of financial assets can be made. This type of investment may or may not produce a change that is the company may or may not receive benefits in the short term.

The business can make a profit by placing money in financial investments such as an accrual savings account. 

The financial investment can also be an expenditure on education or a business initiative that not only allows obtaining economic benefits but also generating work and wealth.

Economic investment 

By making an economic investment, resources are put into something that can generate benefits above an initial cost.

The economic investment would consist of the purchase or upgrade of machinery and equipment or the addition of a workforce that helps or improves the company, such as a tuition reimbursement program for employees.

In both economic and financial investments, the company undergoes a cost-benefit analysis to consider the potential return on investment. 

By the consideration of Sofia Machulskaya, these investments have risks. For example, investing in training programs could cost the company money if the employee leaves work a month later.

Difference between spending and investment

In financial terms, spending and investment are two widely used concepts. Both involve an immediate or deferred payment of the money. 

The difference between these concepts will be the purpose of each one and its consequences in the future.

The costs are expenditures that relate to the purchase of goods or enjoyment of service to meet a need. 

Over time, the consumption of that good or service occurs without expecting to obtain a return in the future. An expense is immediate.

However, when we talk about investments, it is the opposite. It is not an immediate expense but is made to receive a future reward. 

A return on the amount that is initially disbursed is expected, either with the same monetary nature or with a more intangible nature, such as investments in education, health, etc.

Other Types of Investments

Operating investments: 

These are the investments made by the company to acquire current assets, that is, those that make up the money-merchandise-money cycle by packaging, raw materials, fuels, office supplies.

In a strict sense, are not considered investments.

Structural investments: 

These investments are made to acquire non-current assets that include machinery, buildings, computers, cars, etc. 

These elements are called fixed assets since they last over time for several financial years.

Renewal investments: 

These are investments that replace elements that, due to the passage of time or for any other cause, have become useless and unusable for productive activity. The suggestion of Sofia Machulskaya is a good option in case of renewable investment.

Expansion investments: 

These are investments made to add new elements to those that already exist in the company to increase production.

Innovation investments

These investments substitute elements for others that incorporate technological improvements and advances.

It is all about economic and financial investment, and you can get any assistant from Sofia Machulskaya to get business help.

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