Who needs brick-and-mortar stores when e-commerce websites allow you to reach millions of consumers by paying a small amount of money? The UK e-commerce industry has a revenue total of 408 billion GBP and grows at a rate of nearly 25 percent per annum. You will certainly find a spot under the sun and start making profit, provided that you have the ideal venue for selling your products and the right online marketing strategy.All businesses that want to sell products and services on the web require e-commerce websites. There are two ways in which you can set up such a site for your business. You can use a readymade template and do all the work by yourself or the other option is to use professional website design services.It is true that a template will usually cost you as little as a couple of hundred pounds and that you can even find one for free while a professionally developed site will usually cost in excess of 2,000 GBP. However, the end result will be attractive pages of content, products that are easy to view and evaluate and will have a flawlessly working payment and shipment system.E-commerce websites have to have a number of components. You must have a home page. Usually, it displays the most popular products and any special deals that the online store currently offers. It should be easy for the visitor to get to the full range of products using the menu bar. In general, it is crucial for an online store to be well organised, categorising products especially if there are a lot of goods on offer.The shopping cart is the most important component of every e-commerce website. This is the tool that allows the visitor to pick a product and make a purchase so it is essential for it to be easy to use and to work flawlessly. You have to have an integrated payment system that is safe and reliable and your clients should be able to use a variety of credit and debit cards as well as various systems for online payments, the more payment options you offer the better.Shipping needs to be well organised. This is the part of an e-commerce website, that visitors do not see, but is crucial for the customer service and reputation of the online stores. The shipping system must work adequately. Best practice is for it to be directly integrated with your inventory software.Each e-commerce website has to provide excellent customer support. If you are using professional services, you will be able to provide not only email and telephone support, but also live online chat support. This will not cost you much in terms of investment, but will improve the quality of your services.Once configured, e-commerce websites require extensive online marketing for attracting visitors and customers. Again, it is advisable to use professional services at least in the beginning. That way, you can have your online store search engine optimised for the products that you offer. You will be able to use email marketing and social media marketing for promoting your business
Starting an Online Business With a Profitable E-Commerce Site
Ecommerce Evolution
The highly competitive ecommerce arena has begun to see an evolution in the paradigm of packages prices and shopping cart platforms. Many ecommerce management software providers are successfully bundling their ecommerce software with storefront templates, shopping carts, and complete marketing services making it easy for the inspired entrepreneur to start an online retail business.While the internet itself always provided a revitalized, virtually unlimited opportunity for making money, there still existed – as with most pursuits – numerous challenges and a somewhat slippery learning curve. Foremost among the obstacles for excited proprietors and transitioning companies, was adapting an existing local retail business to the web: stores without stores, displays without bulky shelving comprised solely of pixels, customers service departments replaced by phone agents, and the unending yearning to create significant brand awareness in a market that had no regional boundaries.However, the advantage of the internet was the profusion of readily available information, and the game began to change slowly, and then rapidly, in a historically unrivaled communication of knowledge in the form of everything internet, from html tutorials to shopping cart solutions, all for the taking for those willing to eager to learn – and to pay. And, so the future and ecommerce were born, fast and unrelenting. The merchants of small town life often seen sweeping the steps of their shops each morning, tidying their stores for the days traffic, spent more time in front of their computers, changing the graphic on their banner ads, as the first, obvious element of online business was recognized. Though online retailers would still require consistently reputable customer service departments and quality products to sustain repeat buying and avoid dangerous complaints from newly sprung online review sites, proprietors foremost need was for a presentable online location – a good website – and ten thousand web design companies responded on cue in a Starbucks-sustaining din, accented by the sound of fingers-flying across Dell keyboards and the exuberance of freshman classes filling the seats of newly-created college web classes.A good web design, a user friendly shopping cart, the right niche products, and successful SEO and cost-per-click marketing quickly arose as ingredients of a winning web formula that companies had to struggle to discover, understand, and master. And, inevitably, as the necessary components of online business become more clearly defined, the opportunity to make money servicing those trying to make money selling was handsomely seized by ecommerce programmers, web developers, and web marketers.It is somewhat dizzying and mathematically staggering, looking back now in 2010, to remember just how fast the internet rose since its dawn, first cresting the technological mountains. Now those musing starting an online business over their cappuccino the morning after graduation can sign up with a monstrous drop-shipping conglomerate offering thousands of products, carefully select a design company promising exceptional custom work for a few hundred bucks, hire an inexpensive SEO firm promising first page results, and barrel head long into an unknown, optimism-laden online business future.Unfortunately, like falling stars on an August night, the sight of once-bright entrepreneurs burning out from their web dreams has become a regular statistical vision, and the reality considered by this article. Namely, how viable is creating an online business? And specifically, have ecommerce companies succeeded in delivering the services that give you a better chance of succeeding than failing?Sure, we’re way past the early ’90′s when everybody was jumping on the internet as it sailed away from it’s brick-and-mortar harbor, but ecommerce still has no end in sight and is, perhaps, more appealing possibility than ever for Americans analyzing the future of their financial well-being in a lengthening recession.Online adaption has taken place though, and while early internet pioneers faced a more uncertain journey – having less affordable options available for web services – modern web mavericks will face a different primary problem: themselves. There’s just too many people doing the same thing and the competition can be fiscally suffocating. It’s in the choices made during that critical growing stage that will play the largest role in being able to jump to the next milestone without drowning out. Like everything, to succeed online will, without question, require some investment, but spending little enough to put all the pieces in place – a dependable hosting solution, an appealing, dependable site, successful CPC and SEO marketing strategies, efficient ecommerce management tools, etc. – and getting a large enough return in the form of purchasing consumer traffic while make or break a new generation of potential web tycoons.Enter the aggressive arena of ecommerce and you’ll find numerous ecommerce software providers and web development companies standing by the gate ready to equip you for the battle for a nominal fee, themselves engaging in a tense contest to earn your money as you pass by. But choose wisely, young maverick, because paying too much for the wrong service could leave you strapped when you get the marketing gauntlet and have no padding left. There are specialized web designers, shopping cart providers, SEO gurus, custom programmers, and hosting giants all dangling their goods before you with appealing phrases like “scalable”, “custom”, and “#1″, vying for your selection. Other companies promise to do it all for peanuts, and while tempting, leave you with a nagging anxiety that may be getting less than you paid for, which is very little. Then there is an aisle of ecommerce giants that are well adorned, and seem stronger and more experienced, holding a long list of previous champions they’ve supplied, and they would likely be an excellent choice except that the young business warrior would suffer a debilitating loss just paying for the goods, before ever seeing their brand’s flag waiving in the arena.Though some may come to the ecommerce table with a sizeable sum and a wealth of business management experience, I am most interested in the plight of those who do not. For those weary occupational travelers, business confidence may fall sharply as hard earned start-up capital diminishes, and success will be carefully garnered by monitoring spending.For sake of those e-commerce combatants, we’re most interested in the growing breed of ecommerce providers who offer complete services – hosting, design, shopping cart, store management tools, analytics, seo marketing, ssl certificates – basically everything you need – at an affordable price. These vendors bring a ray of hope to the prospect of starting an online business, and can certainly bring forth operational proof of other companies they’ve assisted numbering in the tens of thousands. Which begs the question, with so many advanced yet simplified tools available and so many companies already enjoying success, how easy is it really? Does anyone with a desire, some cash, and a willingness to succeed really have a shot at the modern American dream – making a viable income working from home as an internet retail proprietor? A home-brewed latte, some checkered pajames, and a picture window for office adornments are the stuff of dreams for many office-scorched blue collar Americans.So, just how well do total ecommerce providers succeed at helping you succeed?There are numerous good ecommerce players out there – Volusion, BigCommerce, Shopify, and 3DCart are a few notables – that can provide your store with a site, hosting, ecommerce platform system, shopping cart, customer support, etc., however, they can vary significantly in quality, ease-of-use, and price – all factors that can affect the reality of online success.The question is, in a rush of e-commerce competition, have packages become like so many package products, appearing to include everything you need but lacking in fundamental quality. Children’s fishing sets are available at discount retailers that provide a pole, reel, lures, weight, bobbers, and an assortment of neon-colored tackle for under $15, but many Dad has faced crying toddlers after arriving at the vacation destination to discover that the reel jambs and the lures don’t work. When it comes to your ecommerce provider, you don’t want to be a victim of that old adage, getting only what you paid for. After all with competition and technology increases, can’t we demand that the functional value of our purchases exceed their cost, or at least exceed another product of the some price.Some ecommerce companies offer relatively cheap shopping carts and management tools, but their site templates are crudely commercial – replicas with differing color schemes – and obtaining a custom design is an additional service costing hundreds or thousands more. Once you enter into a deep-digging, nuts and bolts comparison you’ll discover the variety in price, quality, service, usability, is great even among competitors. Ultimately, selecting the right company will depend upon your particular business, target market, product catalog, knowledge level, experience and budget, with the latter likely holding more weight than all others.One of my favorite new ecommerce comapnies this year is AWDCommerce, (http://www.awdcommerce.com) an emerging Montana based e commerce software developer and a subsidiary of American Web Design, for their quality, cost, and small-town style customer support. They offer over 500 customized storefront designs for numerous industries of very high quality for a professional site, robust ecommerce management tools, exceptional small-town style customer service, shopping cart, unlimited products, support, and hosting for $39.99/mo. What I liked most is AWDCommerce combination of price, quality, and support – they provide everything, with friendly small town support to back it up, for under $40 a month. The storefront designs offered a superb quality against comparable templates – providing entrepreneurs with a truly, professional appearance – plus they offer agent-assisted assimilation and customization of logos and graphics, making the site formation easy for the unsavvy. Rather than offering “scalable” plans labeled like Olympic medals, they allow up to 10,000 products so you have room to grow without seeing a higher monthly bill. AWDCommerce developed ecommerce platform didn’t look as nice as some, but was very easy to use and offered a strong array of professional management features. The company also offers custom programming for any required app development and organic SEO and cost-per-click marketing services to help spread your brand wings.I wouldn’t be surprised to see AWDCommerce show significant growth in the e-commerce market this year, and are a good example of a smart, all-inclusive provider for proprietors with limited pockets seeking to get the most bang for their buck.There are many good companies out there able to provide a website, hosting, shopping cart, web-based management tools, analytics, and marketing and I would assert that, more than ever before, they do indeed make it possible for proprietor’s with the right niche product and work ethic to successfully launch an online business with as little as a few hundred bucks. One things remains certain though: choosing carefully in the selection of web services will have a measurable impact on your business once you enter the arena and find yourself before the cheering crowd, with internet royalty like Google and Yahoo watching your emergence with a robotic efficiency.So be encouraged. The merchant games have always been tough, and though the intensity may have make a daunting plateau, there may have never been as much help available or potential gain as now.As a previous cash-strapped, green-footed web proprietor myself, I wish all a happy deployment and good showing in the games.
Finance, Credit, Investments – Economical Categories
Scientific works in the theories of finances and credit, according to the specification of the research object, are characterized to be many-sided and many-leveled.
The definition of totality of the economical relations formed in the process of formation, distribution and usage of finances, as money sources is widely spread. For example, in “the general theory of finances” there are two definitions of finances:
1) “…Finances reflect economical relations, formation of the funds of money sources, in the process of distribution and redistribution of national receipts according to the distribution and usage”. This definition is given relatively to the conditions of Capitalism, when cash-commodity relations gain universal character;
2) “Finances represent the formation of centralized ad decentralized money sources, economical relations relatively with the distribution and usage, which serve for fulfillment of the state functions and obligations and also provision of the conditions of the widened further production”. This definition is brought without showing the environment of its action. We share partly such explanation of finances and think expedient to make some specification.
First, finances overcome the bounds of distribution and redistribution service of the national income, though it is a basic foundation of finances. Also, formation and usage of the depreciation fund which is the part of financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value during a year), but to the distribution of already developed value.
This latest first appears to be a part of value of main industrial funds, later it is moved to the cost price of a ready product (that is to the value too) and after its realization, and it is set the depression fund. Its source is taken into account before hand as a depression kind in the consistence of the ready products cost price.
Second, main goal of finances is much wider then “fulfillment of the state functions and obligations and provision of conditions for the widened further production”. Finances exist on the state level and also on the manufactures and branches’ level too, and in such conditions, when the most part of the manufactures are not state.
V. M. Rodionova has a different position about this subject: “real formation of the financial resources begins on the stage of distribution, when the value is realized and concrete economical forms of the realized value are separated from the consistence of the profit”. V. M. Rodionova makes an accent of finances, as distributing relations, when D. S. Moliakov underlines industrial foundation of finances. Though both of them give quite substantiate discussion of finances, as a system of formation, distribution and usage of the funds of money sources, that comes out of the following definition of the finances: “financial cash relations, which forms in the process of distribution and redistribution of the partial value of the national wealth and total social product, is related with the subjects of the economy and formation and usage of the state cash incomes and savings in the widened further production, in the material stimulation of the workers for satisfaction of the society social and other requests”.
In the manuals of the political economy we meet with the following definitions of finances:
“Finances of the socialistic state represent economical (cash) relations, with the help of which, in the way of planned distribution of the incomes and savings the funds of money sources of the state and socialistic manufactures are formed for guaranteeing the growth of the production, rising the material and cultural level of the people and for satisfying other general society requests”.
“The system of creation and usage of necessary funds of cash resources for guarantying socialistic widened further production represent exactly the finances of the socialistic society. And the totality of economical relations arisen between state, manufactures and organizations, branches, regions and separate citizen according to the movement of cash funds make financial relations”.
As we’ve seen, definitions of finances made by financiers and political economists do not differ greatly.
In every discussed position there are:
1) expression of essence and phenomenon in the definition of finances;
2) the definition of finances, as the system of the creation and usage of funds of cash sources on the level of phenomenon.
3) Distribution of finances as social product and the value of national income, definition of the distributions planned character, main goals of the economy and economical relations, for servicing of which it is used.
If refuse the preposition “socialistic” in the definition of finances, we may say, that it still keeps actuality. We meet with such traditional definitions of finances, without an adjective “socialistic”, in the modern economical literature. We may give such an elucidation: “finances represent cash resources of production and usage, also cash relations appeared in the process of distributing values of formed economical product and national wealth for formation and further production of the cash incomes and savings of the economical subjects and state, rewarding of the workers and satisfaction of the social requests”. in this elucidation of finances like D. S. Moliakov and V. M. Rodionov’s definitions, following the traditional inheritance, we meet with the widening of the financial foundation. They concern “distribution and redistribution of the value of created economical product, also the partial distribution of the value of national wealth”. This latest is very actual, relatively to the process of privatization and the transition to privacy and is periodically used in practice in different countries, for example, Great Britain and France.
“Finances – are cash sources, financial resources, their creation and movement, distribution and redistribution, usage, also economical relations, which are conditioned by intercalculations between the economical subjects, movement of cash sources, money circulation and usage”.
“Finances are the system of economical relations, which are connected with firm creation, distribution and usage of financial resources”.
We meet with absolutely innovational definitions of finances in Z. Body and R. Merton’s basis manuals. “Finance – it is the science about how the people lead spending `the deficit cash resources and incomes in the definite period of time. The financial decisions are characterized by the expenses and incomes which are 1) separated in time, and 2) as a rule, it is impossible to take them into account beforehand neither by those who get decisions nor any other person” . “Financial theory consists of numbers of the conceptions… which learns systematically the subjects of distribution of the cash resources relatively to the time factor; it also considers quantitative models, with the help of which the estimation, putting into practice and realization of the alternative variants of every financial decisions take place” .
These basic conceptions and quantitative models are used at every level of getting financial decisions, but in the latest definition of finances, we meet with the following doctrine of the financial foundation: main function of the finances is in the satisfaction of the people’s requests; the subjects of economical activities of any kind (firms, also state organs of every level) are directed towards fulfilling this basic function.
For the goals of our monograph, it is important to compare well-known definitions about finances, credit and investment, to decide how and how much it is possible to integrate the finances, investments and credit into the one total part.
Some researcher thing that credit is the consisting part of finances, if it is discussed from the position of essence and category. The other, more numerous group proves, that an economical category of credit exists parallel to the economical category of finances, by which it underlines impossibility of the credit’s existence in the consistence of finances.
N. K. Kuchukova underlined the independence of the category of credit and notes that it is only its “characteristic feature the turned movement of the value, which is not related with transmission of the loan opportunities together with the owners’ rights”.
N. D. Barkovski replies that functioning of money created an economical basis for apportioning finances and credit as an independent category and gave rise to the credit and financial relations. He noticed the Gnoseological roots of science in money and credit, as the science about finances has business with the research of such economical relations, which lean upon cash flow and credit.
Let’s discuss the most spread definitions of credit. in the modern publications credit appeared to be “luckier”, then finances. For example, we meet with the following definition of credit in the finance-economical dictionary: “credit is the loan in the form of cash and commodity with the conditions of returning, usually, by paying percent. Credit represents a form of movement of the loan capital and expresses economical relations between the creditor and borrower”.
This is the traditional definition of credit. In the earlier dictionary of the economy we read: “credit is the system of economical relations, which is formed while the transmission of cash and material means into the temporal usage, as a rule under the conditions of returning and paying percent”.
In the manual of the political economy published under reduction of V. A. Medvedev the following definition is given: “credit, as an economical category, expresses the created relations between the society, labour collective and workers during formation and usage of the loan funds, under the terms of paying present and returning, during transmission of sources for the temporal usage and accumulation”.
Credit is discussed in the following way in the earlier education-methodological manuals of political economy: “credit is the system of money relations, which is created in the process of using and mobilization of temporarily free cash means of the state budget, unions, manufactures, organizations and population. Credit has an objective character. It is used for providing widened further production of the state and other needs. Credit differs from finances by the returning character, while financing of manufactures and organizations by the state is fulfilled without this condition”.
We meet with the following definition if “the course of economy”: “credit is an economical category, which represents relations, while the separate industrial organizations or persons transmit money means to each-other for temporal usage under the conditions of returning. Creation of credit is conditioned by a historical process of fulfilling the economical and money relations, the form of which is the money relation”.
Following scientists give slightly different definitions of credit:
“Credit – is a loan in the form of money or commodity, which is given to the borrower by a creditor under the conditions of returning and paying the percentage rate by the borrower”.
Credit is giving the temporally free money sources or commodity as a debt for the defined terms by the price of fixed percentage. Thus, a credit is the loan in the form of money or commodity. In the process of this loan’s movement, a definite relations are formed between a creditor (the loan is given by a juridical of physical person, who gives certain cash as a debt) and the debtor.
Combining every definition named above, we come to an idea, that credit is giving money capital of commodity as a debt, for certain terms and material provision under the price of firm percentage rate. It expresses definite economical relations between the participants of the process of capital formation. Necessity of the credit relations is conditioned, from one side, by gathering solid quantity of temporarily free money sources, and from the second side, existence of requests of them.
Though, at the same time we must distinguish two resembling concepts: loan and credit. Loan is characterized by:
o Here, the discussion may touch upon transmission of money and also things form one side (loaner) to another (borrower): a)under the owning of the borrower and, at the same time, b) under the conditions of returning same amount or same quantity and quality of the things;
o The loaning of money may bear no interest;
o Any person may take part in it.
With the difference with loan, credit, which is somehow a private occasion of the loan, represents:
o One side (loaner) gives to the second one (borrower) only money, and _ for temporal usage;
o It may not bear no interest (if the assignment doesn’t foresee something);
o In it creditor is not any person, but a credit organization (at the first place, banks).
So, a credit is the bank credit. To our mind, it is not correct to use “credit” and “loan” as the synonyms.
Banking crediting is the union of relations between bank (as a creditor) and its borrower. These relations touch upon:
a) Giving a certain amount of money to the borrower for definite purpose (though, we meet with the so-called free credits, aims and objects of crediting are not appointed in the assignment);
b) Its opportune returning;
c) Getting percentage rate from the borrower for using the sources under his/her disposal.
The essential foundation of the credit essence and its important element is existence of trust between the two sides (in Latin “credo”, from which comes the word “credit”, means “trust”).
From the position of circulation of money forms (in the abstraction, historical process of formation economical relations and social budget and banking systems expressed by them) comparing different definitions of finances and credit, the paradox conclusion appears: credit is the private occasion of finances. And truly, from the position of movement of the money forms, finances represent the process of formation and usage of the funds of cash means. Very often such movements are fulfilled without returning, but sometimes, it is possible to give loans from the budget for the investment projects of other needs. Also, when a manufacture or corporations use their cash funds and we mean the finances of industrial subject, such usage may be realized as inside the manufacture or corporation (there is no subject about returning or not returning of the usage), so gratis under conditions of returning. This latest is called commercial form because of transmitting the sources to others, but even in this occasion, it is the element of financial system of the manufacture and corporation.
From the point of cash means movement, main character of credit is the process of formation and usage of the funds of cash means under the conditions of returning and, as a rule, taking the value-percentage. If gating the credit value doesn’t take place (even in the exceptional occasions), according to the movement form, credit becomes a private occasion of finances, as from the net financial funds (consequently from the state budget) the loans which bear no interests may be used. If gating credit value takes place, by the appearance form, credit is discussed to be financial modification.
From the historical point of view, finances (especially in the sort of the state budget) and credit (beginning with usury, later commercial and banking) were developing differently for considering credit to be the part of finances. Though, from the genetic-historical point of view, previous loaners, before giving loan, needed gathering the permanent capital not returning, that is the net financial foundation. The banks analogously needed concentration of the important own capital for influxing the consumers’ means and for getting higher percentage rate under the conditions of returning. Herewith, exactly on the financial basis, in the sort of financial fund (which later partially becomes loan fund) part of the bank capital appears to be the reservation (insurance) part of the fund, which by nature is financial and not loan. So notwithstanding the essential distinctions between finances and credit form the genetic-historical point of view, credit appears to be formed from finances and represent their modification.
From the essential position of expressing economical relations of finances and credit, we meet with cardinal distinctions between these two categories. Which mostly expressed by the distinction of the movement forms notwithstanding they are returnable or not. Finances express relations in the aspects of distribution and redistribution of social product and part of the national wealth. Credit expresses distribution of the appropriate value only in the section of percentage given for loan, while according to the loan itself, a only a temporal distribution of money sources takes place.
Herewith, there is a lot of common between the finances and credit as from the essential point of view, so according to the form of movement. At the same time, there is a significant distinction between finances and credit as in the essence, so in the form too. According to this, there must be a kind of generally economical category, which will consider finances and credit as a total unity, and in the bounds of this category itself, the separation of the specific essence of the finances and credit would take place.
Funding of the cash means is common to the researched economical categories. It takes place in any separate system of finances and credit, which have been touched upon during the analyses of defining finances and credit. Word combination “funding of the cash sources (fund formation)” reflects and defines exactly essence and form of economical category of more general character, those of finances and credit categories. Though in the in economical texts and practice, it is very uncomfortable to use a termini, which consists of three words. Also, “unloading” with an information hardens greatly its influxing into the circulation even in the conditions of its strict substantiation and thoroughness.
In the discussing context we consider:
1) wide and narrow understanding of economical category of the finances;
2) discussing finances in narrow understanding under general traditional meaning;
3) discussing finances, as funding of the cash means, in wide understanding, which concerns finances – in narrow meaning and credit – in complete meaning.
Termini “funding” and its equivalent “fund formation” are used by us as the purposeful structuring of cash means, which is based on two poles – accumulation of money sources (gathering) and its usage for definite purpose in the way of financing and crediting.
We have established a new termini – “finance-investment sphere” (FIS). Analyses about interrelation of finances and credit made by us give us an opportunity of proving, that in the given termini, the word “financial” is used with the meaning of funding cash sources, its purposeful structuring. In this process we consider at the same time financial, credit and investments’ economical categories.
Let’s sum up middle results of discussing new concept – “finance-investment sphere” and discuss its investment consisting parts.
The concept “investments” was brought into the native economical science from the West. In the Soviet economical science they for a long time used in the place “investments” the termini “capital placement”, which expressed the usage of the industrial factors in the sphere of real industrial activities during realization of capital projects. From one glance, this termini in its concept is identical to the “investments”, consequently it is possible to use them as synonyms. Though the termini “investments” and “investing” have the advantage towards the termini “capital placement” from linguistic and philological points of view, because they are expressed with one word. This is not only economical and comfortable in the process of working with the termini “investment” itself, but also it gives an opportunity of termini formation. More concretely: “investment process”, “investment domain”, “finance-investment sphere” – all these termini are much more acceptable.
Changing native economical termini with foreign ones is purposeful, if it really matters (by keeping parallel usage of the native termini for the inheritance). Though we must not change native economical termini into foreign ones all together, when by ordinal traditional language easy to explain private and narrow concrete processes and elements get their own termini. The “movement” of these termini is approved in the narrow professional bounds, but their “spitting out” into the economical science may turn economical language into the tangled slang.
Let’s discuss termini – “investment” and “capital placement’s” usage in the economical literature.
Investments are placement of funds into the main and circulation capital for the purpose of getting profit. “Investments in material assets – are the placements of funds into the mobile and real estate (land, buildings, furniture and so on). Investments in financial assets are the placements of funds into the securities bank accounts and other financial instruments”.
We don’t meet with the termini “investments” in the earlier economical dictionary, but we meet the combined termini “investment policy” – the union of the industrial decisions, which guarantee main directions of the capital investments, the activities of their concentration in the determinant suburbs, on which the reaching of planned rates of development of the society production is depended, balancing and effectiveness, getting more and more production and profit of the national income for every lost Ruble”. For today, in the most actual definitions, the capital investments are bounded only by financial means, when not only financial, but also the investment of natural, material-technical and informational resources takes place. Labour resources take an actual place in the investment process. They themselves fulfill this or that investment process.
A positive side of the discussed definitions is that they connect investment policy and capital placements (investments):
- economical development according to the key directions to the concentration;
- providing high rates of economical growth;
- raising an economical effectiveness, which is expressed:
a) by growing the throw off of the production and national income for every lost Ruble;
b) by fulfilling the branch structure of the investments;
c) by improving their technological structure;
d) by optimization of their further production structure.
Compared with such definition of the investments (capital placement) the definition of investments in the dictionary attaching the “Economics” seems to be unimproved: “investments – the expenses of gathering production and industrial means and increasing material reserve”. In this definition current expenses (production expenses) are mixed with the investment (capital) expense. Also, not the investment expenses but (though the investments are followed by the appropriate expenses) exactly advancing. It differs from the expenses by that the means (means) are put by returning the advanced values, also, under the conditions of growth, to which the concept-advanced capital is corresponding. the advancing may be realized in the money, natural-material and informational forms.
Except the termini “investments”, there are two more termini related with the investment. They are shown below.
“Human capital investment” – any activity provided for rising the workers labour productivity (in the way of growing their qualification and developing their abilities); at the expenses of improving the workers’ education, health and raising the mobility of the working forces”. It is very useful to use the mentioned termini, though it needs one correction: the human capital investments do not concern only workers, but also the servants, representatives of every kind of labour.
“Investment commodity, capital goods – a capital.”
In the official manuals of political economy of the reformation time the capital investments are discussed as “expenses for creating new main funds and widening, reconstruction and renewing the active ones”. In this definition the investments (capital placements) during separation of the forms (types) of further production of the main funds are bounded only by main funds (without increases of the circulation funds and insurance reserves):
a) creating new ones;
b) widening;
c) reconstruction;
d) renewing.
Also, the concept of the industrial gathering appears, at the expenses of widening of basic, circulation funds and also insurance reserves takes place”.
You’ll meet below the definitions of investments from “the course of economy”: the investments are called “placements of fund into the basic capital (basic means of production), reserves, also other economical objects and processes, which request long-termed influxing of material and cash means. “According to the division of capital into physical and money forms, the investments too must be divided into material and cash investments”.
They apportion investment commodity, to which belong industrial and nonindustrial building objects, vehicles purposed for changing or widened technical park and the furniture, increasing reserves and others.
“They call the total investments of production an investment product, which is directed towards keeping and increasing the basic capital (basic means) and reserve. Total investments consist of two parts. One of them is called the depreciation; it represents important investment resources for compensation of renewal till the level of before industrial usage, wearing out and repairing of the basic means. Second consisting part of the total investments is represented by net investments – capital investments for the purpose of increasing basic means”. Depreciation is not a compensation resource of wearing the basic funds out, but it is the purposeful financial source of such resources.
Human capital investment is “a specific kind of investments, mostly in education and health protection”.
“Real investments are the investments in the economical branches and also, they are kinds of economical activities, which provide influxing the increases of real capital, that is increasing material values of the industrial means”. We can agree with such definition with one specification that material and nonmaterial values too belong to the real capital (wealth), consequently science-researching experimental-construction results, various information, education of he workers and others. Such service as organization of the excitable games, also the service of redistribution social wealth from one private person to another (except charity).
“Financial investments represent placement of funds into the shares, obligations, promissory notes, other securities and instruments. Such investments, of course, do not give increases of the real material capital, but they help getting profit, consequently at the expenses of changing the course of the securities in the time of speculation, or distinguishing the course in different places of sell and purchasing”. We share wholly such definition, hence it follows that financial investments (if it is not followed by real investments as a result) do not increase real material wealth and real nonmaterial wealth. According to this context, the expression below is very important: “we must distinguish financial investments, which represent placement of the funds in the ways of selling and purchasing the securities for the purpose of getting profit and financial investments, which become cash and real, moved to real physical capital.”
In the “economical course” quoted before long and short-termed investments are separated. Recognizing the existence of the bounds between them, the authors ascribe short-termed investments to “one month or more” investments. If we get such conditioned criteria, that we can call the investments which overcome the terms of some months, long-termed ones, which is very doubtful and we don’t agree with it. A long-termed character of the fund placement is a significant feature of the investments (short-term doesn’t combine with the concept of investments). Principally, it would be better to point out quick compensative, middle termed compensative and long-termed compensative investments:
- less then 6 months – quick compensative;
- from 6 months up to the year and a half – middle termed compensative;
- more then the year and a half – long termed compensative.
We stopped at the definition of the investments in the capital work “economical course” for the special purpose, as, in it the author tried to discuss the concept of investments systemically and quite completely, herewith the book is published just now.
We’ll return to the discussion the definition economical category of “investments” in different publications in the following chapter. The definitions given here are quite enough for having a notion of the level of lighting up the given category in the economical literature.
What conclusions may be made according the definition of the mentioned economical category in the published works, except the made notions and specifications?
There is quite deeply, concretely and thoroughly defined the concept of “investments”, different definitions in the economical literature; but mostly in every works about the investments discussed by us until now, there is not opened the essence of investments as an economical category. In every monograph , even if it has a title investment, as an economical category , there is given only the definition, concept of investments. But, as the Academician Vasil Chantladze explains, “a concept is a discussion, which proves something about the distinguishing feature of the researched object. A concept out of much essential characteristic features represents only one, and essential in it is only – definition”.
But the categories are much wider; it is “a key, the most fundamental concept of every science”. Economical categories theoretically represent real, objectively existed productive relations. A category is the defining of occasions of existed characters, connections, relations of the objective world. Generally, any educational process is fulfilled by the categories, which give opportunities for dividing the processes and occasions semantically, for expressing the definitions of a subject and realize their specific peculiarities and economical relations of a material world.
Our goal is exactly to substantiate investments – as an economical category and also, as a financial category in the narrow understanding.
Here we apply for another manual thesis made by the academician Vasil Chantladze: “every financial relation is an economical one and every financial category is and economical one, but not every economical relation and economical category is financial relation and financial category”.
In the process of defining the investments, it is important to take in mind the sides of resources, expenses and incomes, because investment, from one side, is the result of the manufacture’s activity, and, from another one, – a part of income, which, in this case, is not used for usage.
Another occasion: it is advisable to discuss investments in two aspects: as a category of reserve and flow, which will reflect exactly the connection between “placement of funds” and “investments”.