I. The concept of investment Investment is an important economic activity that directly or indirectly applies funds to production and business activities. Second, the significance of investment ① Investment is the premise for enterprises to obtain profits ② Investment is the necessary means for enterprises to survive and develop ③ Investment is an important way for enterprises to reduce risks ③ Classification of investment ① According to the length of payback period, investment can be divided into short-term investment and long-term investment. ② According to the investment direction, investment can be divided into inward investment and outward investment. ③ According to investment methods, investment can be divided into direct investment and indirect investment. According to the different rights and interests of investors, it can be divided into equity investment and debt investment; ⑤ According to different investment purposes, it can be divided into investment to increase income and investment to expand rights and interests; ⑥ According to different investment functions, it can be divided into strategic investment and tactical investment. Section II Forms of Internal Investment of Enterprises The forms of internal investment refer to the specific forms of various economic resources formed by putting the raised funds into the internal production and operation activities of enterprises. The main forms are: 1. Current assets 1. Monetary funds include: cash, bank deposits and other monetary funds. 2 short-term investment enterprises to buy a variety of securities that can be realized at any time and hold for less than one year and other investments that do not exceed one year. Including short-term stocks, short-term bonds and other short-term investments. Enterprises can only be used for short-term investment if they have excess cash in the short term. Its purpose lies in: ① reserve the ability to pay. ② Increase idle cash income. 3. Accounts receivable The accounts receivable and irrecoverable accounts formed by the commercial credit provided to customers by enterprises for selling commodities, products or providing services are called accounts receivable, including bills receivable, accounts receivable and prepayments. The reasons for using accounts receivable investment are: ① it is beneficial for enterprises to expand sales and increase market share; (2) It is beneficial for enterprises to reduce excessive inventory, so as to reduce capital occupation and save their storage costs; (3) is conducive to the acquisition of futures, to ensure the smooth progress of enterprise production and business activities. 4 inventory enterprises in the production and business activities for sales or consumption and storage of various assets. Including commodities, finished products, semi-finished products, products in process and various materials, fuels, packaging materials, low-value consumables, etc. In order to ensure normal production and sales activities and increase profits, enterprises need to arrange a certain amount of inventory when making internal investments. Disadvantages: ① Increasing the inventory reserve will increase the occupation of working capital, ② increase the inventory loss and its storage cost, and ③ bring the loss of price reduction when the inventory market price drops. II. Fixed assets From the perspective of investment purposes, fixed assets include fixed assets for production and operation and fixed assets for living and welfare. 1. Fixed assets for production and operation Fixed assets that play a role in the production and operation activities of enterprises are called fixed assets for production and operation. ① It is the main material and technical basis for enterprises to engage in production and business activities, and ② it is an important guarantee for enterprises to obtain income. Enterprises often give priority to it when investing internally. 2. Enterprises with welfare fixed assets will gradually get rid of the social burden, and the investment in welfare fixed assets will decrease. Three. Intangible assets 1. Concept and Scope Assets owned by enterprises that have no physical form but can earn income are called intangible assets, which mainly include patent right, trademark right, copyright, land use right, franchise, non-patented technology and goodwill. 2. Purpose or advantages ① Intangible assets are a kind of use privilege, such as site use right and lease right, which is conducive to the survival and development of enterprises; (2) Intangible assets are a kind of technical privilege, such as patent right and non-patent technology, which is beneficial for enterprises to maintain their leading edge in production technology and management level; (3) Intangible assets are a kind of profit-making privilege, such as franchise, trademark right, copyright, goodwill, etc., which is beneficial for enterprises to obtain excess income. 3. Disadvantages or disadvantages Intangible assets investment is risky, not only because intangible assets investment often takes a long time and requires a lot of money, but more importantly, because the success rate of this investment is relatively low. Section III Forms of Enterprise's Foreign Investment There are many forms of enterprise's foreign investment. According to certain standards, direct investment can be divided into: acquisition and creation, sole proprietorship and joint venture, branches and subsidiaries; Indirect investment can be divided into stocks and bonds. First, the legal procedures of acquisition and creation are different. There are two forms of foreign direct investment: acquisition and creation. Investing in the purchase of existing enterprises or shares of existing enterprises is called acquisition; Investing in a new enterprise is called creation. The advantages of 1. acquisition (1) can form new production capacity at home and abroad as soon as possible; (2) Being able to occupy new domestic and foreign sales markets as soon as possible; (3) Being able to expand product categories as soon as possible and open up new production and operation fields; (4) Obtain the production technology, management experience and brand trademark of the acquired enterprise; (5) being able to obtain a stable supply of goods; (6) The investment amount is relatively low, especially when buying unprofitable enterprises at a low price or taking advantage of the stock price crash to buy enterprises, the investment amount will be far lower than that created. 2. Disadvantages of the acquisition (1) The investment scale and enterprise address are difficult to achieve the investors' goals. (2) Enterprise management is difficult to standardize. (3) High failure rate. 3. The choice of acquisition and creation When making the choice of acquisition and creation, investors should consider both the investment profit factor and the control factor of the invested enterprise. 2. Wholly-owned and Taiwan-funded enterprises 1. The advantages of joint venture (1) can gain more financial resources, scientific research and material resources; (2) new sales markets can be obtained; (3) being able to gain local management experience; (4) We can take advantage of local investors' familiarity with the investment environment to reduce investment risks; (5) Preferential policies can be obtained from the host government; (6) It can reduce or avoid the losses caused by nationalism and xenophobia in the host country. 2. Disadvantages of the joint venture (1) The investor does not have complete control over the joint venture (some host governments stipulate that the shares of foreign investors in local subsidiaries shall not exceed 49%), so it is difficult to realize their investment intentions; (2) Investors are prone to differences in business management, profit distribution, import and export of raw materials and products. (3) Investors will give up some experience in production technology and marketing management; (4) It is impossible to avoid tax reasonably through internal transfer price. 3. Factors affecting the choice of sole proprietorship and joint venture A. Internal factors: (1) The greater the advantages in technology, products, sales and management, the stronger the requirements of the investment company for equity, so the greater the possibility of adopting sole proprietorship as an investment form; Otherwise, joint ventures should be adopted. (2) For companies with concentrated product varieties, it is more favorable to adopt the form of sole proprietorship to avoid the "collision" phenomenon of products produced by joint ventures in the export market; When implementing the product diversification strategy, joint venture can be adopted. (3) An investment company with strong financial resources should adopt the form of sole proprietorship; Otherwise, joint venture should be adopted, which is more conducive to the use of local resources. B. External factors: (1) If the host country does not allow the establishment of wholly foreign-owned enterprises, the investment company can only choose joint ventures. (2) If the market competition in the host country is fierce, direct investment with the host country as the sales market should choose joint venture. (3) The partner of the host country with strong business ability and high work efficiency should choose the form of joint venture. 4. The arrangement of ownership structure, sole proprietorship and joint venture, and the investment proportion of joint venture are all issues of ownership structure. When arranging the ownership structure, an investment company must fully understand and deeply study the following matters: (1) Advantages and disadvantages of different ownership structures; (2) the purpose and strength of the direct investment of the investment company; (3) The purpose, advantages and conditions provided by the host country's partners; (4) Relevant laws and market environment of the host country. Three. Branches and subsidiaries 1. The difference between a branch and a subsidiary (1) A branch can only be a wholly-owned economic organization; A subsidiary may be a sole proprietorship or joint venture economic organization. (2) The branch is the agency of the investment company, not an independent legal person, and its business activities are all controlled by the investment company; The subsidiary is not an agency of the investment company, but an independent legal entity, but the investment company has a certain degree of control over the subsidiary (some people call the investment company a first-class legal person and the subsidiary a second-class legal person). (3) The branch is not a civil subject, and the legal liability shall be borne by the investment company; Subsidiary is a civil subject, and all legal responsibilities of its business activities should be borne by itself. (4) The branch company shall bear unlimited liability economically by the investment company; The subsidiary is limited liability by the investment company. (five) the profits of the branch shall be fully included in the total profits of the investment company; Subsidiaries pay income tax independently and only distribute dividends (or profits) to investors. 2. Comparison and selection of branches and subsidiaries A. Considerations: (1) The taxes paid are different. (2) Enjoy different preferential policies. (3) Foreign business disclosure is different. B. Conclusion: ① Generally speaking, if the investment scale is small and you are not familiar with the international investment environment, it is best to choose a commercial branch, because this will help the investment company to understand and be familiar with the international investment environment and explore the development path. ② If the investment scale is large and you are familiar with the international investment environment, you can choose a productive subsidiary, which is more conducive to the development of the investment company in the direction of international operation. 4. Stocks and bonds (1) The stock investment is 1. The advantages of stock investment are: (1) high return on investment. (2) It can reduce the loss of purchasing power. (3) Strong liquidity. (4) It can achieve the purpose of controlling the joint-stock company. 2. The disadvantage of common stock is high investment risk: ① The market of common stock is unstable due to many factors, such as enterprise financial situation, market interest rate, economic policy, political changes, investor psychology, speculators' interference and so on. (2) Dividends of common shares are distributed after preferred shares. When the profit of the joint-stock company declines, the dividends received by shareholders will decrease and even bear the responsibility for losses; (3) When the company goes bankrupt and liquidates, the right of common shareholders to invest lags behind that of creditors and preferred shareholders, and even there is no right to claim the remaining property. 3. Selection of long-term and short-term stock investment ① Short-term investment aims at obtaining dividends and stock bid-ask spreads. Instead of taking risks, it is better to invest a lot of money in various high-quality stocks that can be realized at any time to reduce risks and improve returns. (2) The purpose of long-term investment is to participate in the management and control of the joint-stock company, and a large amount of funds should be concentrated to invest in the common stock of the target company, so that the investment amount can reach a certain proportion of the share capital of the target company, thus achieving the purpose of controlling the target company. (2) Bond investment 1. Advantages of bond investment: (1) The investment income is relatively stable. (2) Good investment safety. 2. Disadvantages of bond investment: it is impossible for bond investment companies to participate in controlling the issuer's business activities. (3) Selection of stocks and bonds ① Investment companies that dare to take risks, pursue high returns and strive to expand their strength should choose long-term common stocks for investment; (2) Investment companies that are unwilling to take risks but want to obtain stable income should buy bond investment, and if necessary, they can buy some preferred stocks or short-term common stocks to achieve the best portfolio of securities. Analysis method of investment decision. The cash flow of investment projects (added in 2003) includes the following three parts: (1) Original investment The original investment is the cash flow at the beginning of investment. Including: fixed assets investment, current assets investment, investment opportunity cost, other investment expenses and original fixed assets income. (2) Net cash flow in each year = cash inflow in each year-cash outflow in each year (3) Cash flow at the end of the period refers to the cash flow at the end of the project life, including the income from the mid-term price change of fixed assets, the recovery of the residual value due, and the recovery of the original prepaid funds. , manifested as cash inflows. 2. Common methods of investment decision analysis (1) payback period method 1. If the annual net cash flow is equal to the investment payback period (year) = total investment ÷ annual net cash flow = annual net income of the project+fixed assets recovery depreciation. 2. If the annual net cash flow is not equal to the calculation of investment payback period, the accumulated net cash flow at the end of each year and the unrecovered investment at the end of each year should be considered. (2) Return on investment method 1. Formula: return on investment = annual net cash flow ÷ total investment * 100% 2. If the annual net cash flows of related schemes are not equal, then when calculating the return on investment, the average value of the annual net cash flows should be calculated first, and then other formulas for calculating the return on investment should be calculated. (III) Net Present Value Method The net present value method is a method to decide the scheme selection according to the net present value of each scheme. The scheme with positive net present value is desirable, otherwise it is not desirable. Among the schemes with positive net present value, the scheme with the largest net present value is the optimal scheme. (4) Profitability index-The scheme with profitability index greater than or equal to 1 is desirable, otherwise it is not desirable. Among the investment schemes with profitability index greater than 1, the scheme with the largest profitability index is the best scheme. Profitability index method is usually used to analyze and compare schemes with different investment bases. Internal rate of return method 1 IRR is the rate of return that makes cash inflow equal to cash outflow. 2. Formula: ① Formula for calculating internal rate of return according to present value: see the textbook p 135. ② The formula for calculating the internal rate of return of annuities: see the textbook p 135. (VI) Expected value method Expected value is the weighted average value of random variables with their respective corresponding probabilities as weights. Expected value method is a method to choose the best investment scheme by calculating and comparing the expected value of profit and loss (or cost) of various venture capital schemes.