Physical investment

Property investments (also called real investments ; English tangible investment ) are investments in physical assets in economics and business administration . The opposite is the intangible investment .

General

The concept of tangible investment is in the literature does not uniformly described, but usually with materialized objects of fixed assets and working capital associated. With regard to the type of investment object, there are tangible, financial and intangible investments. Capital investments belong to the (material) real goods .

species

To property investments are in companies primarily assets of fixed assets , consisting of land and land rights , (developed or undeveloped) technical equipment and machinery , factory and office equipment , vehicles , paid down payments to this, and assets under construction there. Depending on the investment intention, physical investments can be divided into expansion investments (expansion of capacity ), replacement investments or rationalization investments.

Expenditures for balance sheet items in current assets are usually not regarded as capital investments in the literature because they lack the property of long-term investment.

Accounting

For accounting purposes , Section 266 (2) A II of the German Commercial Code ( HGB) provides for a separate balance sheet item “Tangible assets” on the assets side of the balance sheet , which, depending on the type of company, has to be broken down even more strongly. In the asset history sheet , the gross investments made in property, plant and equipment in the financial year can be read in the "Additions" column.

Economics

If the level of interest rates on the capital market rises, capital investments decrease and vice versa. This is due to the marginal efficiency of capital , which forms the actual basis of investment decisions. Companies only invest when the marginal efficiency of capital exceeds the current market interest rate. If an investment generates a higher return than an alternative financial investment , it is invested and vice versa. However, if the market interest rate increases, the probability that the marginal efficiency is higher than the market interest rate decreases . In addition, debt-financed tangible investments increase the cost of capital and thus the fixed costs due to the higher loan interest , so that profits decrease or losses increase.

With the expected service life of a machine to be purchased of 2 years, the following formula results:

${\displaystyle AK=Q_{1}+{\frac {Q_{2}}{1+R}}}$

Here are the acquisition costs of the investment Net income of the investment in the first year Net income of the investment in the second year Marginal performance of the capital (return on investment)
${\displaystyle AK}$
${\displaystyle Q_{1}}$
${\displaystyle Q_{2}}$
${\displaystyle R}$

While the expenditures in road construction for renovation, expansion and maintenance are booked under capital investments in the financial statistics , they are reflected in the national accounts as state consumption.

Individual evidence

1. ^ Andreas Rühle, The Assessment of Strategic Personnel Investments , 1999, p. 52
2. ^ Alfred Stobbe, Volkswirtschaftslehre III: Macroeconomics , 1987, p. 18
3. ↑ Bernhard Felderer / Stefan Homburg, Macroeconomics and New Macroeconomics , 1989, p. 110 f.