Explain fixed investment and inventory investment. Explain their significance also.​ - Brainly.in (2024)

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Explain fixed investment and inventory investment. Explain their significance also.​ - Brainly.in? ›

The type of commodities on which investment is to be made is the primary distinction between fixed investment and inventory investment. Fixed investment, means spending on investments in capital goods. Contrarily, inventory investment refers to the cost associated with stock investment.

Meeting Customer Demand

Inventory investment is significant because it enables businesses to meet customer demand. Maintaining inventory levels allows businesses to have the necessary products on hand to fulfill customer orders promptly.

The fixed-Income investment provides the comfort of a regular stream of income in the form of interest. Also, certain Fixed Income products like Market Linked Debentures (MLD) have differential tax rates while products like Public Provident Fund (PPF) are exempt from tax on coupon payments.

Business Fixed Investment: It is the expenditure by producers on the purchase of Fixed Assets like plant and machinery and other capital items. Inventory Investment : It refers to change in stock during the year. It is closing stock less opening stock.

To purchase inventory, a firm often opts for short term financing via existing funds/borrowing. To purchase a fixed asset, a firm opts for long term financing through existing funds/borrowing. The holding period for a fixed asset is generally less than a year. The holding period for a fixed asset is more than a year.

Fixed assets are owned by the business and used to generate revenue, while inventory is a current asset because it is reasonable to expect it can be converted into cash within one business year. From an accounting perspective, fixed assets and inventory stock both represent property that a company owns.

Thus, fixed investment is investment in physical assets such as machinery, land, buildings, installations, vehicles, or technology. This example is from Wikipedia and may be reused under a CC BY-SA license. Fixed investment contrasts with investments in labour, ongoing operating expenses, materials or financial assets.

The difference between goods produced (production) and goods sold (sales) in a given year is called inventory investment. The concept can be applied to the economy as a whole or to an individual firm, however this concept is generally applied in macroeconomics (economy as a whole).

Fixed investment in economics is the purchasing of newly produced fixed capital. It is measured as a flow variable – that is, as an amount per unit of time. Thus, fixed investment is the accumulation of physical assets such as machinery, land, buildings, installations, vehicles, or technology.

What does inventory investment equal? ›

Inventory investment refers to the difference between the goods and services produced in the economy during a period and the goods and services sold in that year. Inventory investment is calculated since it is an important component in the estimation of gross domestic product.

Inventory, in and of itself, is really not that bad. But too much of it is. Having the right amount of inventory helps us respond faster to customer orders, ask for premium prices for delivering product sooner than our competition and avoid expedited shipping costs. All of that leads to market expansion and growth.

Fixed assets are company-owned, long-term tangible assets, such as forms of property or equipment. These assets make up its day-to-day operations to generate income. Being fixed means they can't be consumed or converted into cash within a year. As such, they are subject to depreciation and are considered illiquid.

Fixed-income investing is generally a conservative strategy where returns are generated from low-risk securities that pay predictable interest. Since the risk is lower, the interest coupon payments are also, usually, lower as well.

Fixed assets are physical or tangible assets a company owns and uses in its business operations to provide services and goods to its customers and help drive income. These assets, which are often equipment or property, provide the owner with long-term financial benefits.

Fixed-income securities usually have low price volatility risk. Some fixed-income securities are guaranteed by the government providing a safer return for investors. Cons: Fixed-income securities have credit risk, so the issuer could possibly default on making the interest payments or paying back the principal.