Monday, March 4, 2024

Difference Between Financial Investment And Economic Investment by 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.

https://hubpages.com/@sofiya-machulskaya

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