Calculating actual and planned investment

An investment is an asset that is procured with the expectation that it will generate income or appropriate in the future. It is the order of the day for anyone that wants some level of financial liberty to make investments from time to time by purchasing goods that will not be consumed today but used to generate wealth that is hopefully more that the investment cost.

There are different ways to make investments, just as there are a lot of things to be considered before going into any business venture. For the purpose of this post, our aim will be on planned and actual investment.

No single person can predict completely correctly what the future of an investment holds; even the smartest investment planners tend to get it wrong here and there when making such plans. This is not to say that it is not important to make such plans, but to have it in mind that things, in most cases, may not work as expected; and to have a backup action for the unexpected.

WHAT IS A PLANNED INVESTMENT?

A planned investment is an organized order on how to spend money in the procurement of assets in the coming year. Such assets, also referred to inventory and capital goods, include both raw material and unfinished items that have the ability to generate cash for the investor. Capital goods in this case refer to business purchases such as company trucks and manufacturing equipments. Such purchases can generate income for the company.

A planned investment sounds like the beginning of a new business and it is not wrong to think so. While it may be very necessary for new businesses to make such plans for their next business year, it is also important that already existing businesses make such kind of investment too.

WHAT IS AN ACTUAL INVESTMENT?

An actual investment is the result of inventory and planned investment. Inventory is the amount of all products available to be sold to other consumers or businesses. From another point of view, it can be said that inventory is an investment, but it has to be a balanced one for it to yield good results. Here, the investor is faced with the reality of a business. Efforts are made to implement all the plans made for that particular business year, but it may not work out as expected. For instance, manufacturing equipment may manufacture products needed to be sold, but the sales of those products may not go well; or the equipment might break down and incur more expenses, in this case, not planned for.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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