The marginal cost increases as more funds are raised and shows how much investment can be made without changing the target capital structure

The efficiency limit of additional capital attraction from the standpoint of the level of its weighted average cost. It characterizes the increase in the value of capital in comparison with the previous period. The marginal cost of capital is calculated using the formula:

where UCS is the limit cost of capital;

Increase in the weighted average cost of capital;

Increase in capital amount.

By comparing the marginal cost of capital with the expected level of profitability for business operations that require additional attraction of capital, it is possible in each specific case to determine a measure of the effectiveness of such operations (primarily this applies to investment operations).

The assessment of the cost of capital should be completed by developing a criterion indicator of the effectiveness of its additional attraction. Such a criterion indicator is ultimate efficiency capital. This indicator characterizes the ratio of the increase in the level of profitability of additionally attracted capital and the increase in the weighted average cost of capital. The marginal efficiency of capital is calculated using the following formula: PEC = ΔРк/ΔССК, where PEC is the marginal efficiency of capital; Δ Рк - increase in the level of return on capital; ΔССК - increase in the weighted average cost of capital.

The stated principles of assessment make it possible to form a system of basic indicators that determine the cost of capital and the boundaries of its effective use.

Among the indicators considered, the main role belongs to the weighted average cost of capital indicator. It develops at the enterprise under the influence of many factors, the main of which are:

The average interest rate prevailing in the financial market; availability of various sources of financing (bank loans; commercial loans; own issue of shares and bonds, etc.);

Industry Features operational activities, which determine the duration of the operating cycle and the level of liquidity of the assets used;

The ratio of the volumes of operating and investment activities;

Enterprise life cycle;

The level of risk of ongoing operating, investment and financial activities.

These factors are taken into account in the process of targeted management of the cost of equity and debt capital of the enterprise.

Question 19. CAPM model and corporate β-coefficient.

The CAPM model (Capital Asset Pricing Model: a model for assessing the profitability of a financial asset, or a financial asset pricing model) is a quantitative method for comparing the risk associated with an asset and its profitability. Purpose of applying the method: the CAPM model allows you to predict the profitability of a financial asset (iozh); in turn, knowing this indicator and having data on the expected income for this asset, you can calculate its theoretical (forecast, internal) value. For this, the basic formula of the capitalization method is used: V = I / R, where R = iozh + of; iozh – expected, or required, profitability; of – rate of return of capital. The CAPM model is a quantitative method for assessing the return on investment in an asset in comparison with market returns using the coefficient β, which indicates the coincidence of the trends in the price of a given (analyzed) security with the average trend in prices. valuable papers by group of enterprises. The basic formula of the CAPM model: iozh = ibezr + β×(imarket - ibezr), where ibezr is the risk-free rate of return; imarket – expected market rate of return. The coefficient β in the CAPM model is a measure of systematic (improper, market) risk of this asset. In general, for the securities market the β-coefficient is equal to one. For individual companies̆ it varies, as a rule, from 0.5 to 2.0.

CAPM model. The most important characteristic of this model is that the expected return of an asset is linked to the degree of its riskiness, which is measured by the β-coefficient. In order to understand how prices of financial assets develop, it is necessary to construct a model. The valuation model for common shares will look like this.

Кs = Кrf + (Км – Кrf) β

Ks is the price of ordinary shares as a source of financing.

Кrf – risk-free return on securities.

Km is the market value or required return of the securities portfolio.

(Km – Krf) – market risk premium.

β is a coefficient characterizing the measure of variability of the company’s shares relative to the average stock price on the market.

Most often, it is recommended to use interest on long-term government obligations as a risk-free rate of return.

The β-ratio reflects the level of volatility of a particular security relative to the average and is a measure of earnings per share compared to the average earnings of the securities market.

Question 20. Weighted average (WACC) and marginal (MCC) cost of capital

weighted average cost of capital, WACC) is used in financial analysis and business valuation. The total price of capital is the average of the prices of each source in the total capital. The indicator characterizes the relative level of the total cost of providing each source of financing and represents weighted average cost of capital

where is the share of the source in the cost of capital of the company and its profitability (price).

The weighted average cost of capital (WACC) is determined for a specific period of time based on prevailing economic conditions. This is based on the following assumptions:

1. the market and book values ​​of the company are equal;

2. the existing structure of the used sources of financing is acceptable or optimal and should be maintained in the future.

The marginal cost of capital (MCC) refers to the cost of attracting an additional unit of capital. The relationship between current and future assessments cost of capital corporations provide using the indicator (Marginal Cost of Capital, MCC). It characterizes the increase in the amount of each new unit of it, additionally attracted into economic circulation. Marginal cost of capital expresses the costs that the company will have to incur to reproduce the required structure capital under current financial market conditions. For example, a corporation plans to implement a new investment project for the development of oil and gas fields. To do this, it is necessary to attract additional sources of financing, which can only be obtained on the financial market. In this case, the forecast cost of capital, which will be considered extreme, may differ significantly from current market valuations. Calculation marginal cost of capital(MSS) is carried out according to the formula;

MCC = ∆WACC/∆Cap

You can only manage what is measurable. Introduction to Applied Economics Concepts "economic profit" allows you to orient management activities enterprises to a new criterion - return on capital. There are several reasons why the return on capital in the domestic economy is still not manageable. Firstly, this is the division of the enterprise’s activities into production and investment, although from the point of view of evaluating results this is one and indivisible.

In economic theory there is no division between investment and production activities. It examines how decisions are made, choices are made when creating capital and using it. the theory of costs and their minimization, the theory of profit maximization, the theory of enterprise behavior in the sales market, the labor market, the theory of supply and demand in the capital market - all these studies are devoted to problems associated with the creation of capital, the production and sale of products over time. Costs and returns from investments are different from decisions about costs, revenues, and profits from producing a product.

What is the reason for the need for special consideration of the problems associated with the creation of capital, with the cost of capital and net income from capital? This is due to different time stages in the life of the enterprise, i.e. with the period of its creation and its further improvement, development (growth). The capital creation stage is primary, it precedes the production stage. Production activity is associated not only with actual profits and costs that are obtained during reproduction, but also with the capabilities of previously created capital, i.e. income that can be obtained over time from invested capital. In practice, after the creation of an enterprise, a period of further improvement begins. This stage has a temporary duration. After the stage of capital creation, not only the stage of production follows, but in parallel, the realization of income from capital occurs over time. It follows from this that the end result will be net income from capital, and not profit from the production and sale of products. The object of research should be capital in all its diversity, and not its individual form, i.e. products. The time period of the research is different, longer - the period of operation, the life period of the enterprise, and the aspect of the research is what happens with the growth of capital over time. As soon as the economic growth capital ceases or is suspended, capital begins to lose its “power”, its “talent” to generate net income. On the one hand, capital determines profit from sales of products, on the other hand, profit determines income from capital. When income from capital is determined, the production and profit from it are given; when profit is formed, the capital is given and constant. When income from investments (capital) is examined, future profits are used; when income from products is determined, current profits are considered.

Ignoring the temporary factor in applied domestic economics equates profit with net income on capital. This does not allow return on capital to be controlled directly. In addition, the approach to generating profit itself is also one-sided. If profit is the difference between income and expenses, then there should be an orientation not only to minimizing costs, but also to maximizing income. It follows that the strategy for generating net capital income should be based not only on a lower level of costs, but also on a higher level of income.

Another reason is due to the fact that the socialist state was “embarrassed” to manage capital income, falsely believing that this should be inherent only to capitalism.

Capital gains are future income. But future income is always uncertain, i.e. the choice not only in the project, in the plan, but also in the current time must be made taking into account these uncertainties.

The next problem is related to determining the actual percentage of capital income and managing the percentage of capital income in conditions of expanded reproduction.

Economic theory suggests how future capital returns should be assessed, how present costs and future profits should be analyzed, how to determine whether costs will be recovered, and how uncertainty should be taken into account.

The enterprise operates with various capital: financial, physical, fixed, working, human. Costs and income can be associated with capital services, with the acquisition of ownership rights to capital and the use of already created fixed capital, which is measured as property owned by the enterprise, including working capital, the form of which constantly changes during the production cycle.

But what is the capital being created? In what form is it considered in theory? How is the demand for capital measured in the capital market?

Since capital is divided into created and created, it is necessary to distinguish between capital as an object of purchase and sale on the market in a specific physical material form and as a stock of capital goods of an enterprise.

The difference between those capital services (capital goods) that the enterprise currently has and the necessary, desired, expected flow of services of specific capital goods determines the amount of demand for capital services. Capital as a production resource is acquired and purchased on the markets of production factors. When they talk about buying capital, they mean that new capital, which appears in a given period at the enterprise. If an enterprise feels the need to increase its capital stock or creates it (stock) again, then the desired change in the capital stock is measured by investment. A change in the capital stock may be associated with the replenishment of both fixed and working capital.

By purchasing fixed capital on the market (machinery, equipment, buildings), the enterprise not only increases its capabilities in fixed capital services, but also replenishes capital reserves. By increasing funds invested in working capital, for example, into industrial reserves, by purchasing more materials, fuel, etc. than usual, the enterprise also increases its reserves of capital goods.

To invest, a company needs free (temporarily) funds. If the enterprise does not have them or they exist, but in insufficient quantities, then the enterprise turns to the financial capital market.

In the case of creating capital or changing its stock, enterprises do not present a demand for specific, material goods, i.e. machines, buildings, structures, etc., but on temporarily free funds, because they can be spent on any material goods, converted into fixed and working capital, and returned by giving away part of the profit received from their use in the future.

Thus, in theory, the capital market is not a market for capital goods, but a market Money; The demand for investment is characterized by interest rates.

The capital market, as it were, equalizes the return on investment (both equity and borrowed capital) to a single interest rate, or more precisely, determines its single lower level, since owners of borrowed capital can invest it in various means of production. The principle of opportunity costs must be observed in this case as well, and must apply to the capital being created and its new reserves. In accordance with this principle, enterprises can ensure profitability not lower than the market rate (bank interest rate). In this regard, it makes no difference whether the enterprise deals with borrowed or equity capital. The upper level of profitability is differentiated by various means production.

An enterprise, refusing the current (immediate) use of funds for the sake of future income, loses the opportunity to receive a certain amount of products today. The return on investment must be no less than the opportunity cost, i.e. benefits from today's use of funds.

To successfully manage the return on capital, it is necessary not only to select an investment project (capital investment) or type of investment (type of securities) taking into account risk and profitability. To do this, it is necessary to master the method of analysis and selection of possible investments, methods of comparing expenses with future income, which should include an assessment of the actual economic situation in the economy as a whole, an assessment of the industry sector and the economic position of the enterprise.

Capital investments, by their material nature, are difficult to manage for a number of reasons; Among them is a temporary delay in returns or investment lags. The longer the lag, the longer the period of time from the start of capital investment to the start of its return, the more difficult it is to manage and influence them. The result, the return on capital, is realized through a lag, which until its end “hides” and accumulates problems that in the long term aggravate the economic condition of the enterprise. The impossibility of a universal approach, the non-standard nature of the situation and the problems to be solved during the period of capital use makes practical investment activity difficult to predict and turns actual profitability into a hidden value.

However, even at the stage of assessing the feasibility of the actual activity of an enterprise from an economic point of view, there are a number of approaches, following which one can achieve better results for the enterprise in the future, create means of production or replenish reserves with the most profitable capital, i.e. manage it.

Since the benefits and costs of using capital are usually diverse and their magnitude depends on many factors (conditions), including the valuation method, return on capital management should be based on basic principles, which are fundamentally in many ways consistent with the principles of investment.

The basic principles of return on capital management should be considered:

If capital is allocated and used economically illiterately, then the cost of error will be expensive. The larger the enterprise, the greater the cost of capital, the higher the responsibility of the economist, since losses will increase over time. Disinvestment cannot compensate for losses associated with shortfalls in net income from capital over time.

The principle of marginal return on capital will help determine the maximum, appropriate amount of income from capital. To do this, an optimization problem on the efficiency of capital investments is solved. Each additional amount of investment is associated with a different amount of additional income.

Zero marginal return on capital determines the lowest level of expediency economic activity.

The principle of combining material and cost assessments of the efficiency of capital use has three options. The first is to compare relative inputs and outputs. But in conditions of inflation, sales growth in physical terms may fall, and inflation may hide the deterioration of the enterprise’s position, so a combination of cost and physical performance indicators is advisable. The second is based on a combination of monetary and technological efficiency criteria, for example, it takes into account an increase in print quality, and not just a reduction in costs. The third is a purely technical (technological) approach to assessing efficiency, i.e. it does not take into account the valuation of the result, for example when high quality becomes a priority criterion.

The principle of adaptation costs involves taking into account all costs associated with adaptation to the new actual environment. For example, the volume of output lost from regeneration is measured. organization of production and the costs of retraining personnel, the cost of readjustment, new equipment for changing conditions, etc. Loss of time is measured as loss of income. You can't adapt instantly. Losing time in theory means the death of capital, a decrease in its profitability. Hence the practical conclusion is that adaptation costs should be included in the calculation of the price at which new products will be sold. The greater the demand for products, the greater the adaptation costs that the enterprise can afford to include in the price, the more efficient the use of capital will be, despite even the adaptation costs.

The principle of the multiplier or multiplier is based on the interconnection of industries. For example, an increase in demand for a book automatically causes an increase in demand for its technological components: paper, fabric, plastic, foil, film, etc. Knowledge of production technology makes it possible to calculate the correlation coefficient, the multiplier effect of this relationship, and the enterprise can find out in advance the prospects for its income. The multiplying effect can be compared to the effect of a moving wave. You can calculate when the wave will reach the industry where the enterprise operates, increasing or decreasing its profitability.

The multiplier makes it possible in advance, knowing the time and economic strength specific impact, it is beneficial to use this information: stop profitable production or change its volume, product range. Such a profitable action can be in the form of resale of shares, and in the form of reprofiling of production,

The principle of the relationship between the valuation of reproducible assets on the stock exchange and the real replacement cost of the asset is based on determining the indicator of this relationship

If β > 1, then it is profitable to carry out this action. An increase in the market exchange valuation of buildings in relation to its current value stimulates its replacement, since the market price is greater than the current costs of replacing a given building with a new one. Thus, the return on capital is tied to the relationship between the demand price and the supply price.

The difficulty in analyzing return on capital lies in the need to compare past and current costs with current income. Economists consider past expenses to be greater in the present time than future income in the present time.

In practice, return on capital analysis is a comparison of two situations. The first of them (real) is that the enterprise uses the created capital. The second (alternative) is estimated, possible, normative, potential income.

In a situation where the efficiency of capital is determined taking into account the payback period, the degree of risk, expected inflation rates, tax prospects, etc., rules one and two apply.

Rule one: created capital brings economically net income if, minus taxes and taking into account inflation, economic profit is a positive value, i.e. greater than the income from alternative uses of capital.

Rule two: it makes economic sense to use capital so that the percentage of return on capital exceeds the rate of inflation.

Rule three: determine simple (approximate) net income from capital based on the payback period. Payback period is the period for reimbursing the initial capital investment from profits.

Rule four: use the compounding method.

The essence of the method is that they calculate how the basic amount of capital will grow with the annual percentage increase in income.

The practical meaning of such calculations is that if the company cannot change the percentage of income growth, then it is possible to change the base amount to obtain the required amount of future income. If the starting amount is not specified, i.e. If there is no limit by the bank on the upper limit of lending to the enterprise and there is no financial limit of its own, then the enterprise will try to increase the annual percentage of profitability and reach the desired amount of the increased amount in a specific number of years.

Rule five: for accurate calculations, use compound interest on the cost of capital over the years.

Rule six: it makes sense to redistribute capital only to the most profitable option for using capital.

Determining the feasibility and efficiency of using capital in applied economics, as well as determining the return on capital in economic theory, is based on the fact that managers and economists operate with alternative economic costs, and the essence of comparing costs with income is to identify marginal values: the marginal cost of capital , marginal cost of production, marginal revenue of production, marginal profit, marginal rate of return on capital.

Why does the actual percentage of capital income differ from the desired, projected, assumed? Why do economists advise managing capital income? What do you need to see to manage the percentage of capital income?

The first question is usually never difficult. The actual income from capital differs from the projected one, since reality, reality differs from the project. Managers do not manage capital returns directly because they are broken down by year, i.e. In practice, it is easier to manage profits; it is enough to strive to get the maximum possible profit.

But subsequent questions turn into problems that cannot be solved without economic theory. These questions related to the income generated by capital can be answered economically using the basic concepts of microeconomics, in particular the concept of hidden costs, economic profit, marginal rate of return on capital, and environmental variability.

The actual percentage of capital income usually differs significantly from the expected (projected) one. This is due to a number of reasons, or rather a set of facts, which never completely coincides with what is predicted or desired. The actual percentage of capital income depends on how the company adapts to these changes. Since these are not isolated, but generalized manifestations associated with the synergistic effect, the deviation of the return on capital is determined by determinants - complex, interrelated factors. The main ones are selected and presented in table. 4.1.

Table 4.1.

Factors of deviation of the actual percentage of capital income from the projected one

The dynamics of each of them can be disrupted by the stability of the others and cause a response, a repeated reaction, but in a different combination of effects from changing factors. The result (percentage of income) in such conditions can never be sufficiently predictable.

All determinants, factors of discrepancy between the actual percentage of capital income and the projected one can be divided in relation to the enterprise into external and internal, according to the degree of influence on them - into dependent and independent of the enterprise, controlled and uncontrollable, complex and simple, secondary and basic. The main, complex, integrated determinant, as a rule, independent of the enterprise, is environmental variability.

Variability in the external environment (these are changes at the macro and micro levels) can significantly affect the actual results of return on capital. The scale of the influence of the external environment is not limited to sales markets and production factors, i.e. native industry and related industries, the level of government and the horizons of the state, they can go beyond the country to the international market.

Variabilities, if they remain uncontrollable, without the attention of managers, lead to a deterioration in the indicators of the economic health of the enterprise, to a decrease in the level of the most important of them - the percentage of capital income.

Simply volatility is not enough for an enterprise and its capital to turn out to be low-income. Much depends on how managers react and solve problems that arise in connection with changes. Even if there is significant variability in the environment, but managers know how to protect their production from it, deviations in profitability will be optimal, with the least losses.

There is a theory of variability in the enterprise environment, according to which robust design should be used, as a result of which variability is attenuated.

The actual efficiency of capital will differ from the projected one not only due to changes in the external environment of the enterprise, but also due to internal changes.

It is necessary to distinguish between deviations in the return on capital within a given scale of production, i.e. with stable physical capital, and caused by an increase in the capacity of the enterprise, the introduction of new capital.

Even with a constant nomenclature and range of products and a constant enterprise capacity, the level of return on capital may be different.

In practice, this means that the return on all used (own and non-own) production resources varies from year to year due to less efficient use of created capital due to its underutilization in time and quantity. For example, not all machines are operated in terms of time (all machines work, but only in one shift with a two-shift operating mode according to the project), in terms of power per unit of time (the project provided for the operational speed of the equipment to be higher than the actual one), due to low turnover working capital, low labor productivity, etc.

The actual percentage of capital income will differ from the expected one if the enterprise improves product manufacturing technology, labor organization, production, management system, production structure etc. year after year.

Deviations of the actual return on capital from the desired one can be divided into stages. The actual conditions for the creation of capital, as well as the actual conditions for its use, may differ from those included in the project: a different amount of capital investments, a different cost structure, interest rate, price for purchased production factors, etc.

Thus, the basis for managing capital income, in addition to the principle of maximizing accounting profits and minimizing actual costs, should be the concept of reducing lost income from the use of capital invested in own and purchased production resources.

Since the value of capital depends on the income it can generate in the future, the economics of capital is closely related to the economic theory of risk and uncertainty (in theory - adequate terms).

Any action of an enterprise that affects the future has an uncertain outcome. When a business deposits money into its account, it does not know what its purchasing power will be at the time it needs to use it. Because the rate of inflation between these points is difficult to determine, future capital returns are unknown today.

The activities of enterprises take place in conditions of uncertainty of situations and variability of the operating environment. This means that there is ambiguity and uncertainty in the expected final result, and consequently, the risk, the danger of failure, and loss increase.

Acting in a free market, dictating their terms of transactions, partners strive for their own benefit. And the benefits of some may result in losses for others, since enterprises producing homogeneous products, are trying to force a competitor out of the market.

There are various uncertainties that a business may face. One of the possible classifications of uncertainties in printing enterprises is presented in Table. 4.2.

Table 4.2.

Uncertainty in printing enterprises

Not to avoid risk, but to be able to assess its probability, degree, accessible limits and be able to reduce it - these are the tasks of the enterprise.

No risk, i.e. the danger of consequences unpredictable for the enterprise, its own actions, means the presence of absolutely complete information, in which a general equilibrium state occurs, a state without fluctuations in movements, without changes, which practically means stagnation, i.e. harms the economy, undermines its dynamism and efficiency.

The causes of risk are conditionally combined into four groups, each of which in turn has a number of its own reasons:

change in the conditions for the movement of working capital, financial and labor resources between enterprises, markets, price changes, etc.;

changes in partners’ targets, etc.;

unexpected changes environment the partner is forced to change the terms of the contract with the enterprise, etc.;

the appearance of more advantageous offers forces the enterprise to change its goals.

Risk analysis, both qualitative (i.e., identifying potential areas of risk) and quantitative (i.e., forecasting economic parameters, individual risks), is also based on economic theory, since it is associated with identifying the effects of objective (information, competition, economic, environmental crises, etc.) and subjective factors ( production personnel, technical equipment, labor productivity, etc.) risk uncertainty.

Main types of uncertainties and reduction principles negative consequences from them are presented in table. 4.3.

Table 4.3.

Uncertainty, risk and opportunities to reduce them

In theory, two proposals are given or two principles of behavior are put forward: according to the first, most managers (enterprises) are risk averse, i.e. they will spend money to reduce the risk to which the enterprise is exposed.

According to the second, managers will take risky actions only if average income will be able to compensate for the existing risk.

Both types of behavior are confirmed by reality and explained by theory.

A choice under conditions of uncertainty is a choice with one attempt that will never be repeated, and another possible outcome always remains unknown. Therefore, it is better if the choice is made as a calculated risk.

Uncertainty at the same time contains perspective, i.e. the opportunity to gain significant advantages over those who ignore risk and danger, since poor choices can have costly consequences. Decision making depends on comparing the utilities of different outcomes and choosing the one that brings the greatest expected utility.

The level of utility or welfare under uncertainty depends on how the decision maker evaluates risk.

In conditions where there are neither objective nor subjective assessments of the probabilities of results, two selection criteria are possible.

The first is choosing an option that can give the maximum result under the best circumstances. But this choice is very dangerous with great risk. The second is a choice based on the maximin strategy, i.e. choice best result of all possible worst.

Choice under conditions of uncertainty is based on the same logic of “what is it worth and what are the costs to obtain it,” but taking into account the probability of the outcome. In addition, risk can be reduced through limiting, diversification, insurance, obtaining additional information, audit, implementation of cooperation strategy.

Two criteria help describe and compare the degree of risk. One is the total expected value, the other is the variability of the possible outcome. When determining these criteria, probability is used (objective, based on specific data, and subjective, the estimated probability of the result).

Limitation, restriction, establishment of maximum amounts of expenses, sales volumes, credit, etc. reduce risk, since the degree of risk is directly dependent on the result (costs, output volume, credit, etc.)

The realization of the desire to refuse risk, to pay someone who agrees to take it upon themselves, makes it possible to quickly and successfully make decisions in conditions of uncertainty.

Enterprises insure risk, i.e. pay large sums to avoid risk to other organizations that accept the risk and receive rewards. Not only the real risk is insured, but also the possible one.

There are two types of risk in relation to insurance: insurable and uninsurable risk. An insurable risk is one for which the likelihood of the risk being worthwhile can be established and an appropriate reward can be offered if adverse conditions occur.

Risk-averse managers are willing to give up some income to avoid risk. Typically, these businesses want full compensation for any financial losses they may suffer. Since the income from receiving insurance is equal to the expected losses, stable income equal to the expected return associated with the risk.

Another way to avoid risk and insurance is diversification, which is associated with the acquisition of a portfolio of securities or a portfolio of production orders, or diversified activities in different areas of production, etc. An enterprise can thus insure itself against losses by purchasing securities to compensate for future possible losses.

The theory of choosing the optimal portfolio is currently beginning to be used in the practice of printing enterprises. The return on securities is directly related to the riskiness of the investment.

The relationship between risk and profit from assets is one of the risk management tools. Assets or sources that provide cash income to an enterprise can be in the form of securities (stocks, bonds). The cash flows received from ownership of an asset can take the form of certain explicit payouts (for example, stock dividends) and hidden payouts (for example, the share price fluctuates from day to day and the owner potentially loses certain amounts of money). Payoffs associated with uncertainty produce a risky asset. Stocks involve risk and are an example of risky assets.

If a business decides to invest its savings in several assets (for example, shares of another company and government bonds), it needs to decide how much to invest in each of these assets. It can invest everything only in stocks or bonds, or in a combination of these two assets. For risky assets (bonds), the expected profit (P risk.) is higher than for risk-free ones (P without.), i.e. P without.< П риск. Но как определить, сколько средств предприятие вложит в каждый вид актива?

The expected profit for all securities is determined by the weighted average expected profit (in this case, two assets) P ​​expected. = α P region. + (1 - α) P acc. , where α and (1 - α) are the part of the enterprise’s savings invested in stocks and bonds.

The degree of risk is determined by the stages of operation of the enterprise and types of risk according to expert estimates in points, taking into account their average probability (Table 4.4 - 4.10).

Table 4.4.

Preparatory stage

Table 4.5.

Production stage

Table 4.6.

Stage of operation and financial and economic risks

Table 4.7.

Stage of operation and social risks

Table 4.8.

Operational stage and technical risks

Table 4.9.

Operational stage and environmental risks

Table 4.10.

Risk assessment by economic experts

Table 4.11.

Countermeasures

Managers' decisions are often based on limited information. If a manager has more or more accessible information, he can make a better inference, forecast, and reduce risk. Thus, information is also a valuable commodity and must be paid for.

In economic theory, the cost of complete information is defined as the difference between the expected value of a result (purchase) when complete information is available, and the expected value when information is incomplete.

As an example of using the determination of the value of information as a tool, we can consider the behavior of printing house No. 13 in the market for the sale of notebooks, textbooks and teaching aids for schoolchildren. Typically, a company, when advertising its products, distributes expenses evenly throughout the year. But over the two current years, consumption (purchase) of the company’s products has decreased by 25%. This forced the manufacturer to look for a new sales strategy to stimulate consumption. The company made a decision and developed two strategic lines on a notebook:

1) on their differentiation, which consisted in the fact that at the end of the notebook, on special information pages, useful information on mathematics or Russian language and literature (on the subjects studied) was given;

2) to study the demand for notebooks by month of the year in order to adjust advertising funds during the period of the strongest consumption of the product.

The cost of obtaining seasonal information about the demand for notebooks turned out to be very low, but the value of the information turned out to be very significant. The price elasticity of demand for notebooks is negative and close to one, and the elasticity of demand from income (parents) is positive and significantly higher. Advertising notebooks with the greatest effect influences sales when there is the strongest demand for notebooks - August, September, January, with the least result - in May, June, July. Comparing your sales of notebooks in the current year with the sales that could have taken place if advertising expenses had been carried out in accordance with the seasonal (during the period of schoolchildren’s education) volume of demand (in August, January - 20%, September - 30%, in the rest five months - 10%), the company assessed the value of the information. Having carried out such calculations, the enterprise determined that the cost of information (the cost of additional sales of notebooks) amounted to almost the entire profit received from the sale of notebooks of a new type (with an information sheet).

Calculations and determination of the cost (value) of information show to what extent it may be profitable for an enterprise to invest capital in obtaining additional information.

Over the past decade, the world has become even more uncertain, with circumstances and people even more changeable. Prices, exchange rates, stock prices, interest rates, and inflation rates fluctuate widely. Calculated risk has become an inevitable condition for the success of an enterprise. A type of calculated risk was the strategy of cooperation. For example, the printing company (operational printing) Alba has more than 25 partners in the production of products. The enterprise is now driven not only by competition, but also by cooperation. It is precisely this (cooperation) that is a new source of profit for enterprises. Large and small foreign and domestic enterprises, including printing companies, receive their additional profits by providing high-quality services to their partner clients.

The ultimate goal of the economic strategy is to obtain income from capital not lower than interest in the alternative. Consequently, in order to actually receive income from physical capital (created means of production), the strategic process is carried out. Since the actual receipt of net income from capital is preceded by the collection of information and project calculations (assumptions regarding income under expected conditions), the strategy as a process has the following stages: preparatory, design and implementation stage. The latter should chronologically include not only the implementation, control and evaluation of the results of capital investment and its use, but also have the practical ability to evaluate these results, i.e. must be equipped with a method for calculating the actual net capital return for the year.

Most domestic economist-strategists (G.L. Azoev, L.I. Berdus, E.A. Utkin, E.M. Trenenkov, A.P. Gradov, O.S. Vinokurov) rightly believe that the complete strategic process has the following stages (Fig. 4.1).

At the preparatory stage, the idea is born about the need to change the strategy to change the income from capital based on information analysis. Data is collected about the state of the enterprise, its position in the market, information is accumulated and processed about the external environment, near (primarily about competitors) and distant; including information about new materials, technologies, equipment, etc.

The design stage begins with choosing a “name” for the strategy. At this stage, preliminary justification and comparison with outlines of other strategies take place. Outlines for other strategies usually represent a preliminary economic justification for changes in income for parallel and sequential components of the strategy.

The development of a strategy in accordance with its components is carried out through the detailed development of all strategic projects, which must ultimately justify the profitability of a particular set of strategic projects. A feasibility study of the effectiveness of projects is being carried out.

Assessment of the strategic project for different levels is the final stage project stage. The final choice or approval of a strategic project for the enterprise for a long period is made. The program is studied and discussed by the management of the enterprise, independent specialists in the field of strategy, and potential participants in its implementation. Some changes are made as a joint, final decision on the strategic program is made.

The project implementation stage includes not only the direct implementation of projects, but also control and monitoring of the implementation of the strategic program, its specific projects, activities on them, evaluation of results in order to increase profits received and reduce lost income by the scheduled date, so as not to deviate from the planned growth rate of capital income.

In real conditions, management of the strategic process is curtailed and has no access to actual net income from capital. Evaluating the results of a strategic program, when summing up the benefits received from the implemented strategy, repeatedly comparing them with the initial, projected ones, analyzing deviations, the reasons for successes and failures, is practically not carried out.

Since the benefits, results for various target strategies and strategic projects, thanks to which they can be achieved, are numerous and, as a rule, not always clearly defined several years in advance, then strategy development turns into a complex, long-term, continuous, renewable process of accumulating information and its processing and analysis. Analysis of past results is performed to identify opportunities in the future, taking into account expected changes in the environment for the successful implementation of opportunities in the present.

Depending on the “name” of the strategy, its process receives one or another “coloring”: either actions with costs are at the center of everything, or all proposals and calculations are linked to the volume of output, etc. However, aspects or directions of research, development assumptions, analysis in the strategic process, according to economic theorists, remain typical, similar to different strategies. Firstly, this is the internal aspect, an analysis of the potential and capabilities of the enterprise itself. Secondly, the aspect of the immediate environment, analysis of the immediate environment of the enterprise. Thirdly, the macro aspect, analysis of the distant environment of the enterprise. Fourthly, the short-term aspect, analysis of the short-term results of the enterprise in the expected variants of internal and external conditions. Fifthly, the long-term aspect, analysis of the long-term results of the enterprise in the planned options for strategic projects.

Sixth, the comparative industry aspect, a comparative analysis of the individual capabilities of competitors, including cooperative ones.

Thus, we directly came to the relevance and need for strategic analysis.

Strategic Analysis all aspects at all stages of development and implementation of the strategic program - this is a new concept of competitive (economic) strategy in market conditions. The concept of strategic analysis has its own approach not only to the stages, but also to aspects of the strategic process.

Strategic analysis has the following distinctive features: it is not single-purpose, single-variant, and is based on the level of return on capital. This is not only an analysis of the past to identify lost profits and income, but also an analysis of possible income, profits, costs and their changes in the assumed, alternative conditions to achieve the desired (necessary) level of capital income.

The main principle of strategic analysis is to identify the compliance of expected results with expected conditions. The criterion for evaluating, selecting, and selecting results is the increase in capital income or economic profit.

The goal of the enterprise is to accelerate the growth of capital income and obtain maximum economic profit in the current year. In the process of designing and implementing a strategy, an enterprise “compares” the possibilities of obtaining large economic profits in the future with current losses.

Before the end of the process of developing or implementing a strategic program, he identifies erroneous moves (projects, activities) in order to make possible corrections in time or start all over again (developing a new strategy under different conditions), without wasting time on implementing the strategy (even receiving a positive accounting profit).

It follows that the strategic process should be based on the principle of tracking (through analysis of the dynamics of the rate of increase) the increase in capital income.

Strategic analysis makes it possible to identify different levels of profitability of production individual species products, make a decision about the prospects of each of them.

In addition to assessing existing, achieved levels of income from capital, the analysis should reveal in which areas in the future the enterprise should direct its efforts. This can be done at three levels.

At the first level, they determine the opportunities that the enterprise can take advantage of at the current scale of activity, when the capabilities of the types of products produced in existing markets have not been fully exploited. For example, the editors of a newspaper decided to expand the boundaries of the market and reach residents of the region. This is an example of so-called “intensive growth”.

At the second level, opportunities for integration with other elements of the industry’s marketing system are identified. This integration growth is justified when the enterprise has a strong position or when it can receive additional benefits. Integration growth is achieved if an enterprise manages to bring either its suppliers or distribution system under tighter control, or absorb a competing enterprise.

The third level identifies opportunities outside the industry when opportunities for further growth within the industry have been exhausted or when growth opportunities outside the industry appear to be preferable.

Another principle (indicated in the works of I. Ansoff, V. Karlof, M. Porter, etc.), without which it is difficult to manage capital income, is the creation of a reserve of enterprise sustainability by expanding markets and the range of products produced. Then failure in one market or with a given type of product (income from one product) can be compensated by increased profits in other markets or other types of products.

The economic sustainability of an enterprise exists when it operates in a market with an established price and demand. But if there is information that a competitor can enter the market with the same products, slightly differentiating them, which is typical for printing, then the market may narrow. As a result, the enterprise will be forced to either reduce the price or reduce the volume of production and lose profit, income from capital. This situation, or rather its possibility, forces the enterprise to change its strategy, for example, to move from old products to production and supply to new markets, new types of products, i.e. expand the production profile.

Expanding the profile of an enterprise or a diversification strategy can provide it with an invaluable service, helping it “survive” when there is low demand for products, when it is plagued by failure (low capital income) in the main market.

The diversification effect is based on the concept of additional profit and additional capital income.

A diversification strategy may be targeted, but at the same time it allows the enterprise to gain temporary respite and accumulate funds to continue its main strategic activities. Although this is not entirely clear, since, on the other hand, diversification requires the dispersal of capital across different areas of activity. Let's look at a conditional example (unfortunately, a conditional one, since the real one requires special, lengthy research) what a strategy built on the principle of creating a stability margin can give to an enterprise (Table 4.12).

Table 4.12.

Diversification effect

Let us assume that the enterprise under initial conditions produced only books with a stable profit per unit of output of 10 rubles. Market share was 10%. Competitors reduced their share by 5%, the company reduced the price and received 6 rubles each. arrived per copy. The loss of profit in the new situation amounted to 70 thousand (100 thousand rubles - 30 thousand rubles), or 70% of the original profit (to 100 thousand rubles).

The enterprise has expanded its activities, produces new products - notebooks and sells them on the new market, where its share is 5%, sales volume is 20 thousand units, profit per unit of production is 5 rubles. If the situation in the old market had not changed, then the enterprise would make a profit of 200 thousand rubles on two types of products. In the new situation, after diversifying production, the enterprise will receive 70 thousand rubles. less, but up to 200 thousand rubles. the total profit after diversification will be only 35%.

The enterprise's real losses will be even lower, since the reduction in book production due to a fall in the share of the old market has halved the enterprise's costs for books.

The principle of the stability margin smoothes out the consequences of negative market impacts on the enterprise, showing the diversification effect, which consists in the fact that the same losses in net profit or net capital income now apply to a larger total profit. This increases the efficiency of the enterprise, the percentage of net income and the rate of income growth, i.e. stability of the enterprise in the market.

The most important changes in the surrounding reality for a printing enterprise are associated (in order of priority): with changes in demand for printing services and publishing products within unchanged production; with those changes that affect the production of in-demand manufactured products (services), i.e. within a constant level of demand. Both of these changes actually occur in parallel, following each other and ahead of each other.

Subject to the variability of the environment, the actions of the enterprise also become a complex system. S. Maital depicts the process in the form of two contours. It is more expedient, in our opinion, to call this process double-circuit diversity, since through the investment of profits in the development of production, in new types of products, development of markets, etc. new secondary contours-strategies emerge. The initial strategic contour is a closed “route” along which the enterprise achieves success in production (Fig. 4.2).
By increasing production volume, it reduces average costs. Reducing unit costs makes it possible to reduce product prices without changing profitability. As prices fall, demand for the company's products increases and its market share increases. An increase in share outpacing a decrease in price causes an increase in profits. This, in turn, allows you to make investments: either again in fixed capital (increase capacity) - then the circuit will close and the enterprise will resume the route; or in marketing, technology, various innovations (i.e. consumer properties of products, services), in reducing the labor intensity of manufacturing products, increasing labor productivity, in securities, etc. - and then the contour shifts inward (contracts) or, bifurcating, shifts to the side (expands) and its double-circuit diversity arises, the diversity of the transition of the old contour to the new. There may be no increase in output, but costs will decrease, or it will be possible to change the price, or at the same price and the same costs, demand will increase, or profits will increase due to income from securities. The contour becomes different under the influence of one or another main component of the strategy - narrowed, reduced or expanded, enlarged.

For example, if an investment is made in the new kind product, then its production begins in parallel with the production of the old one. The production of new types of products gradually becomes more and more profitable, conquers the market, and the enterprise begins to increase its production volumes. At the same time, it can reduce the volume of production of products of the old type, i.e. the circuit becomes wider, another impulse link “production” appears new products” and the modified last link “reduction in the production of old-type products” (see Fig. 4.2).

Each time, in order to reach the second circuit, we need not only resources, but also an information and energy source that would direct these funds to right time to the right place. The means that can make such a source work, in our opinion, is a strategic analysis-assessment based on economic profit.

“Efficient” owners of printing enterprises, unfortunately, are looking for short-term profits. They do not view their enterprises as a living, breathing organism and therefore manage them not too “humanely” (making economic mistakes) in relation to their capital.

This subsection offers methodological basis strategic analysis-assessment.

Strategic analysis-assessment combines both positive and normative analysis, this is its peculiarity, specificity and essence. Positive analysis involves explaining and predicting phenomena in the economics of an enterprise, while normative analysis answers the question: how it should be.

Positive analysis of changes in economic conditions seeks to predict the impact of changes in observable phenomena such as profit, income, costs, output, price, etc. With the help of positive analysis, a manager can make statements like “if... then...”, which can then be refuted by comparisons with other facts and figures, dynamics of phenomena. Positive analysis does not clearly assess whether a result is bad or good; the significance of the result remains relative. Determining the relative importance of alternative outcomes requires value judgments, establishing criteria for what is good or bad. Positive analysis helps you make smart choices (in accordance with your values) among possible or proposed options (strategies, policies, projects, programs, activities, indicators) that will have predicted results.

Normative analysis is used to evaluate desired alternative outcomes in accordance with value judgments and criteria. The answer to the question “which is better?” can be obtained as a result of normative analysis.

With the help of normative analysis, business managers can tell what should be done, i.e. a normative statement contains a prescription, not a prediction. Normative analysis is not only about quality choice strategy, it also includes a breakdown of its specific options, i.e. associated with determining the dimensions of a criterion, parameter, indicator.

Thus, strategic analysis consists in the fact that it shows where the enterprise will be after a given time interval if such and such changes occur, and what needs to be done for the enterprise to be “there”, to achieve such and such results, i.e. e. a given level of return on capital. In other words, we can say that through strategic analysis, enterprise managers prescribe significant changes in the activities of the enterprise over time in order to achieve certain strategic (regulatory) goals related to economic profit.

A schematic model of strategic analysis and assessment captures the complexity of the composition, structure, directions and relationships of its components (Fig. 4.3).

Strategic analysis practically permeates all stages of an enterprise’s economic strategy. The analysis is carried out not only at the preparatory stage, when the state of the enterprise and its potential are assessed, but also at the stage of strategy development, when the influence of individual environmental factors on the activities of the enterprise is determined, and at the stage of implementation and control of the strategy, when the strategy is adjusted based on an analysis of the influence deviations from the expected result.

Strategic analysis-assessment covers not only these stages of economic strategy, not only the external and internal components of the enterprise’s operating environment, but also all elements of each of them. All previous stages of analysis ultimately merge into the final (final, main) stage, at which the interaction of changes in external and internal environment, their influence on the final goal and its achievement is determined.

Analysis of the sensitivity of the strategy to the influence of varying environmental factors on the outcome of the strategy (on the rate of growth of capital income) makes it possible to play out the strategy scenario in alternative options.

This analysis includes both quantitative methods, and quality. As a result of a qualitative analysis, new points of application of private strategies can be identified.

The most common method used to conduct sensitivity analysis is simulation modeling. Usually, in a certain set of strategies, the dynamics of one or more of the selected factors are varied, with the dynamics of the rest being fixed, and the dependence of the integral efficiency results on these applications is determined.

Factors varied in the process of strategic dynamic sensitivity analysis can be divided into two groups: increasing and decreasing effect, positively and negatively influencing or causing positive and negative dynamics.

For printing enterprises, the main variable parameters can be:

In table 4.13. a generalized, expanded sequence of varying basic and additional environmental parameters in the process of strategic dynamic analysis for printing enterprises is proposed.

Table 4.13.

Actions and consequences as a result of varying the parameters (factors) of the printing enterprise environment

Additional parameters include any activity related to the implementation of the strategy: reducing the duration of the production cycle, increasing the duration of product sales on the market, reducing the delay in payments for product sales, taking into account fluctuations in demand for products, taking into account the instability of supplies of materials, etc.

Simulation modeling helps determine the necessary actions in response to a real or perceived factor and the consequences associated with these actions and establish the appropriateness of certain actions in accordance with their consequences and the goals of the strategy.

The main strategic task, as a rule, is associated with internal investment activities, or with increasing the efficiency of already created capital, with the choice of the most effective areas of investment in order to increase the competitive status of the enterprise. Flexibility as an economic category reflects the ability of an enterprise to effectively adapt. Strategic flexibility in a general sense involves easy, effortless action to change one or another state of the enterprise.

The degree of flexibility and adequacy of the enterprise profile to the conditions of the macro- and microenvironment can be different: rigid, adaptive, flexible.

In a stable external environment with fairly stable global and local goals, the degree of profile flexibility should not be high, i.e. the enterprise can be equipped with fairly specialized means of production.

Under unstable external conditions, the variability of the enterprise's long-term and short-term goals increases accordingly, i.e. equipping with resources should make it possible to effectively change production facilities. For this, we already need, for example, personnel not narrow specialization, but broad, with high qualifications.

For example, the higher the rate of change in the degree of production diversity of products compared to the rate of change in costs associated with the creation and operation of an enterprise, the greater the degree of flexibility the enterprise profile (G) has, i.e. if G > 1, then production system flexible, G = 1 - adaptive, G< 1 - жесткая. Степень гибкости определяется по формуле, применение которой целесообразно для оценки гибкости профиля полиграфического предприятия:

G = I pr (t n, t k) / I z (t n, t k),

where I pr (t n, t k) = / - rate (index) of change in the degree of production diversity of products; I z (t n, t k) = P (t n, t k)/ P (t n) - rate (index) of cost changes (the ratio of total costs in the first year to the costs of the last year).

In turn, total costs in the first year

and similarly, costs for period tk are determined as the sum of discounted costs over the years:

Total costs consist of the sum of one-time K i and current C i costs per year. Non-recurring costs include costs associated with the formation of: K 1 - technical resources; K 2 - technological resources, K 3 - HR personnel, K 4 - information resources, K 5 - program-algorithmic work, K 6 - spatial resources, K 7 - resources of the organizational and production structure, K 8 - negative compensation social consequences functioning of the enterprise, K 9 - environmental costs, K 10 - for the process of selling products.

Current costs include costs associated with maintaining up to date all the listed material conditions in the production and sale of products, i.e. from C 1 to C 10.

The degree of production diversity of products for the beginning year (t n) and the end year of the period (t k) is determined by the difference (1 - S), where S is the association coefficient characterizing the ratio of the quantity (P S) and the significance of matching production elements (d i) to the total quantity these elements (features of assortment and product range) (P 0)

The degree of flexibility of the enterprise system, in contrast to the degree of return on capital, also includes an assessment of compliance with the principle of product improvement (value). This is at the same time a positive and negative quality of this formula. Assessing the improvement of value (products) by its differentiation, unfortunately, will not always be adequate.

The flexibility of small printing enterprises is higher than medium or large ones, since the index (rate) of change in the degree of production diversity is higher.

The need to optimize enterprise flexibility requires organizing the management of this process. The main goal of enterprise profile flexibility management is to maintain flexibility at a level that ensures effective response to changing market demands over a sufficiently long period. Agility management involves product management and enterprise resource management.

The specificity of strategic analysis and assessment is due to the differences between investment and strategic activities. In contrast to investment activities, as a result of which the enterprise has the opportunity to receive the highest more income from capital, strategic activity leads the enterprise to this most appropriate income, linking the timeliness of its receipt and the sequence of previous actions (enterprise strategies), results (dynamics of expenses and profits) that are associated with them, within a certain period of time.

Strategic analysis-assessment of the internal environment can be presented as one of the functions of the management personnel of an enterprise, as a method for assessing its effectiveness and productivity. In the economic practice of foreign companies, the term “management analysis” is used to mean “the study of an economic system from the point of view of its efficiency and productivity.” The term “strategic analysis” more accurately reflects the essence of this concept. In domestic practice, “management analysis” is still at its origins, in theoretical developments.

The purpose of such an analysis is to determine the efficiency and productivity of a particular subsystem or the entire economic system as a whole. Thus, strategic analysis is used when the manager has a goal - to help the economic system reach a higher level of efficiency and productivity. For example, checking the level of qualifications of production line personnel in bookbinding shops is also a strategic analysis if the task is to determine whether the printing house produces its products effectively and efficiently or not.

There are differences between strategic analysis and perspective analysis. Strategic analysis is not only about prospects economic activity, but also its overall result, i.e. return on capital. The results of strategic analysis can be directed to many strategy developers, but, first of all, are intended for the administration.

Strategic analysis concerns many aspects of the efficiency and productivity of a business system, so it can be applied in a very wide range. For example, identifying the effectiveness of an advertising campaign or the productivity of enterprise workers. Conventional analysis is limited to the problems of identifying reserves that do not directly affect the future of the enterprise. A strategic analyst observes and predicts the dynamics of a particular economic phenomenon in connection with

The basic principle of strategic analysis is that its goals should allow one to determine whether it is possible to increase the achieved level of efficiency and productivity for any area of ​​the enterprise’s activities, and suggest what improvements are needed.

Let us remind you that efficiency and effectiveness are interpreted separately in the strategic dictionary.

Effectiveness characterizes the achievement of set goals, and efficiency characterizes the means, methods, methods used to achieve these goals. An example of effectiveness is the production of products without defects, efficiency is the minimization of its cost.

As with efficiency, efficiency must establish criteria for what is meant by an operation with higher efficiency. It is often easier to establish criteria for efficiency than for effectiveness, if efficiency is understood as reducing costs without compromising productivity. Thus, if two different production processes produce identical quality products, the lower cost process will be judged to be more efficient.

Some types of inefficiency identified during strategic analysis are presented in Table. 4.14.

Table 4.14.

Types of inefficiencies identified during strategic analysis

When developing a strategy, it is usually carried out segmentation- subdivision into smaller segments or elements. This makes work easier and helps distribute specific tasks among team members. Each of the segments can be analyzed separately, although the analysis of all segments is undoubtedly interrelated. After completing the analysis of each segment, including the analysis of the interactions between the segments, you should summarize the findings and then begin to develop a specific conclusion about the strategy as a whole.

A cyclical approach is possible, when a separate analysis is performed in cycles of closely related business activities and operations. Examples of segments of analysis applied to the enterprise as a whole:

sales and receipt of revenue;

organization and remuneration;

operations with inventory items;

capital formation and its profitability.

Strategic analysis widely uses the results of analysis of production and economic activities, when a diagnosis is made, the reserves of the enterprise are identified, when indicators characterizing the state of the enterprise in the current period are determined.

The identified reserves are valuable for strategic analysis in the results of the analysis of the production and economic activities of the enterprise. On the one hand, they talk about inefficient use of resources (a system can serve well for this normative method), and on the other hand, about the amount of lost profits and income. Of all the elements of this analysis, the analysis of financial condition and cost (production costs) is very important for strategic analysis-assessment. An analysis of the financial condition of an enterprise gives a picture of its actual condition: its solvency, liquidity, financial stability, about his profits and the amount of capital used, etc.

In cost as a generalizing economic indicator all sides are reflected production activities enterprises: the degree of technological equipment of production and development technological processes, level of organization of production and labor, degree of use production capacity, economical use of material and labor resources and other conditions and factors characterizing the activities of the enterprise.

Due to its complexity, breadth of coverage, and interconnection of the economic phenomena being analyzed, strategic analysis cannot ignore microeconomic analysis. The application of the principles of microeconomic analysis for making strategic decisions is an integral part of it. Without microeconomic analysis there can be no strategic analysis; it is difficult to arrive at the desired strategy. Strategic analysis is a microeconomic analysis built on the foundations of economic theory.

To confirm what has been said, let us consider, using the example of an enterprise’s product strategy, the application (approximate sequence as one of the options) of the principles of microeconomics. For example, a company offers a new type of product to the market - containers and packaging. The design and efficient production of these products involve the use of the latest advances in engineering and raise many economic issues, many of which can be answered by analyzing the internal environment of the enterprise.

Enterprise managers must understand how favorably a new type of product will be perceived by customers, whether consumers will be satisfied appearance and other characteristics of this product, what the initial demand will be, how it will change over time and how it will be affected by price. Studying consumer requests, forecasting demand for containers and packaging, changes in demand due to changes in the price of a product form an essential part of the strategy for the production and sale of these products.

Then you need to establish the cost of production, determine production costs and their change depending on the annual production of machines. It is also necessary to take into account the size information wages, about the price of basic materials, analyze the size and speed of reduction in production costs as production inventories accumulate. This data is necessary in order to answer the question of how to obtain maximum profit and how to plan the volume of monthly production.

The enterprise must also develop a pricing strategy, weigh how competitors will react to this strategy, and whether it should charge low price or a high price. How will competitors react regardless of the price set, will they try to bring down prices by lowering their own prices, will the company be able to keep competitors from lowering prices by threatening to do so with a discount from their own prices. Strategic program for containers and packaging requires investment in new production equipment. The firm must assess the risk involved and the possible consequences. Part of the risk is associated with the uncertainty of future prices, and the other part is associated with the uncertainty of workers' wages.

The enterprise must also solve certain organizational problems, since it is an integrated organization in which some divisions produce individual parts (semi-finished products), and others then carry out their processing and finishing. It is necessary to assign remuneration to managers of various workshops. It is also necessary to determine what the cost of semi-finished products manufactured by the enterprise is, and whether part of the semi-finished products should be obtained from outside. Finally, the company needs to take into account the requirements of government and legislative bodies in its strategy. For example, the production of containers and packaging must be associated with the least emissions of harmful substances into the external environment, and must comply with safety and labor protection rules. It is also necessary to anticipate the most likely changes in these rules and standards over time, and determine how they would affect the costs and income of the enterprise.

Another example of the active use of the microeconomic principle (dividing costs into constant and variable) is in the strategic analysis of the break-even of an enterprise and profit forecasting. In practice, this is perfectly served by the “direct costing” system.

Using a graph (total income curves, total, variable, fixed costs), you can solve the following problems:

Based on fixed, variable costs and sales volume, determine the amount of profit;

Based on the given profit, determine the volume of sales required to obtain it and the corresponding level of expenses;

For given volumes and costs, determine the price.

At the long-term stage, if production capacity is increased in accordance with the strategy, each enterprise (firm) faces the problem of a new ratio of production factors. The essence of this problem is to ensure a predetermined volume of production at minimal cost. Reducing fixed costs is a concrete way to reduce the break-even point and improve the financial position of the enterprise.

the needs for publishing products and printing services are increasingly changing and improving, which implies a wide range of new types of products, services, possibilities for their development and production,

scientific and technological progress, chemicalization, the emergence of new technologies, materials, equipment create opportunities for the use of various methods of production,

The variability of the operating environment of an enterprise in conditions of non-competitive market relations increases the requirements for information, requires the collection, processing and intensive and targeted use of information.

The interaction of these three reasons has led to such a result that without a clear vision of where the company should be in the next two, five or ten years and how it will achieve it, it is impossible to successfully operate in the modern market in the current period.

The development of the scale of production, types, range of products, the complication of relations between enterprises, between enterprises and consumers, enterprises and suppliers requires answers to many questions when building a competitive strategy. A strategy that improves, develops production, types of products, fights for consumers, for the fulfillment of their desires, which is capable of changing internal production relations and relations in the external environment, making the enterprise viable, reducing competition - this is competitive strategy.

How to achieve competitive advantage- This global problem any enterprise. Managers ask themselves similar questions both at the stage of strategy development and in the process of adjusting it. The implementation of the strategy is practically production and investment activities enterprises driven by economic activity. Therefore, the problem arises of equipping the latter with economic instruments - effective means of management.

Each of the economic instruments (concepts) is focused, made more accessible, and formed when used to build and implement a strategy (Fig. 4.4). The set of economic instruments is in good agreement with theory and practice, assessment of expected and actual results, with the ability to see the future in the present. Some of them, such as the formation of costs, volume, price, demand, and management of capital income, are organizing principles. Through cost, volume, price, value, practicing economists are armed with a framework for decision making.

Capital income management should be used as the main final criterion for assessing the level of economic activity, the actual state of the enterprise's economy.

The structural unity of these instruments gives the economic strategy a mobile design through which it is possible to access its various options depending on the expected conditions, refining this strategy model, taking into account changes introduced by the external environment that occur over time.

Since this structural giant instrument, constructive in relation to the strategy, is a mechanism for generating profit, the strategy automatically meets the criterion for assessing its feasibility and effectiveness - the percentage of income from capital.

Strategy for operating enterprise is not built out of nothing; it is preceded by a real production process, a real economy. Before developing a strategy in accordance with the concept of unity and harmony of costs, price, volume, value, it is necessary to analyze the production process for each type of product from beginning to end, from supply and provision of resources to product sales.

It is the analysis production process operations and knowing how costs, price, volume and value compare with each other and the return on capital generated provides valuable information for choosing a strategy for its further development. At this stage it should practically be given economic assessment"health" of the enterprise.

If an enterprise generates high net income from capital, then the strategy can be aimed at strengthening “health”, at stabilizing it, or at further improvement and development, taking into account possible changes in the external environment. If the economic condition of an enterprise is not characterized by high income from capital or its growth rate is falling, this means that the enterprise is “sick.” It is necessary to make a diagnosis based on the symptoms of the disease, to identify its causes and factors. And then the strategy will have a different focus. If the “illness” is serious and long-lasting (the percentage of capital income drops sharply from year to year, but there is a possibility of stabilization), then the strategy will be aimed at survival, at preventing bankruptcy. If it is determined that production is unprofitable and there is no way to make it profitable in the long term, then the strategy should consist of a clear, rapid curtailment of production.

Assessing the safety margin of the economic health of an enterprise or the degree of its damage requires the use of other economic instruments, concepts, principles related to the formation of costs, prices, values, and determining the level of net return on capital. Their priority and significance depend on the specific state of the enterprise.

The problem of identifying lost income (hidden costs) is the most pressing. Only its practical resolution can remove the veil from the true level of the economic state of the enterprise's capital and show how close the enterprise is to its crisis. Without hidden costs, it is impossible to move to the concept of net income from capital; the logical connection between price, costs, volume, and value with the economic profit of the enterprise is broken.

“Hidden costs” is undoubtedly a strategic tool. If at the preliminary stage of strategy development hidden costs are identified, i.e. work will be done to give them a “quantitative form” in the form of specific values, then when developing a strategy it will be possible to track how they decrease. The presence of large implicit costs (significant specific gravity) may indicate a hidden illness of the enterprise - a gradual decrease in its income (a falling, with a minus sign, percentage of capital income). One of the objects of control over the implementation of the strategy will be changing the “minus” sign to zero and to “plus” for economic profit, reducing lost income and lost profits.

Very important for strategy, i.e. for the development of the enterprise’s economy, all economic instruments associated with the term “cost - volume”, i.e. knowledge of how costs change with an increase in production volume, with a change in the scale of production. For strategy, it is important to know not only the average costs for various output volumes, but also additional (marginal) production costs, to be able to divide costs into basic (variables) and fixed (overheads), to determine whether costs can be reduced by changing the scale of production, sharing the effect of scale and the diversity effect.

Knowledge of the purpose of production resources - labor and capital, materials and information - in comparison with how much they cost the enterprise can provide an invaluable service in reducing costs. If some resources in relation to costs have a high return, while others do not even justify their maintenance, then one of the directions of the strategy may be a change in the structure of production, a change in the qualitative ratio of the costs of resources and their contribution to the overall results.

In this regard, the problem arises of isolating added value by individual resources (types of capital) from the overall results.

A new problem for domestic enterprises is also the problem of alternative choice. The capabilities of an enterprise and the associated choice of strategy direction, methods, paths, and projects for its implementation are aspects of a strategic alternative choice. Without establishing the main alternatives and opportunity costs that the enterprise faces, without comparing the gains and losses associated with these gains, without the ability to accurately evaluate the alternative, the strategy will most likely lose its characteristic qualities: competitiveness, strategicity and efficiency, i.e. will not be able to remain a strategy in in every sense words.

The “alternative choice” in its strategicity is supported by access to the “percentage of capital income”. Losses associated with winnings (receiving income from the use of capital) are lost income. If the losses exceed the gains, then the alternative is incorrect, the choice is erroneous, and the strategy in such an alternative is inappropriate.

This is the most effective economic tool, it is applicable to the whole (strategy) and to the particular (individual event), to small (profit from a separate technological operation) and large (economic profit of the enterprise), to the past (lost income) and the future (possible income) , to cost (choice of costs) and physical (choice of quantitative costs), to reality and project, to decision making and its results, to any type of enterprise activity. An enterprise as a complex integrated economic system cannot function without management. Management begins with decision-making; the decision is based on choice through opportunity costs, including economic costs taking into account uncertainty and risk. Economic costs include hidden costs, hidden costs determine the amount of lost income from capital used, lost income reduces the increase in net capital income, and managing the percentage of capital income is an economic strategy.

It is also inevitable for a successful strategy to use the concept of “value” and “demand”, because without precise knowledge of how the company’s products are valuable to the consumer and how sensitive buyers are to price, how their demand is formed in the industry as a whole and for the company’s products in particular, how Since individual factors influence demand, it is impossible to develop a strategy for shaping consumer behavior.

Thus, an enterprise in conditions of uncertainty, variability of the external and internal environment in time and space, in conditions of using limited (from an economic point of view) production resources (labor, capital) and limited, insufficient information cannot be “viable”, competitive without an alternative choice, acquiring plurality, developing into a system of elections, i.e. into economic strategy.

The competitive strategy of an enterprise can be presented as a synthesis of economic tools (concepts, principles), without the use of which its life period is inevitably shortened, and its capital invariably loses its shape, does not fulfill its mission and inevitably flows into another enterprise or another industry. Since in the economic sense capital is diverse, this is everything in which the financial (monetary) funds of the enterprise (owners of the enterprise) are invested: machines, buildings, employee salaries, materials, development of new products, advertising, enterprise management, sales of products in order to get more greater financial capital, i.e. have income from initial capital. Therefore, the economic strategy of an enterprise is what helps it retain its capital, improving its properties, accelerating its turnover, forcing it to generate more and more income in relative and absolute terms.

Complexity, breadth of coverage, interrelation of the analyzed and assessed economic phenomena are the distinctive features of strategic analysis-assessment, predetermining the need to use the principles of microeconomic analysis, microeconomic tools, i.e. be based on economic scientific knowledge.

Economic strategy is a competitive strategy that can be represented through a synthesis of economic instruments. All the most important economic concepts, such as value, cost, volume, price, alternative choice, cost classification, cost minimization, demand drivers, pricing instruments, economic principles capital return management and a number of others, constitute not only theoretical basis, the basis for developing an enterprise’s economic strategy (strategy for improving its economy), but also the possibility of its practical implementation.

Note also that by investing JD, you are investing at the point where the investment opportunity line just touches the interest rate line and has the same slope. Now the investment opportunity line represents the return on marginal investment, so that JD is the point at which the return on marginal investment is exactly equal to the interest rate. In other words, you can maximize your wealth if you invest in real assets until the marginal return on investment falls to the interest rate. By doing this, you will borrow or borrow from the capital market until you achieve the desired ratio between consumption today and consumption tomorrow.

The rule of the rate of return is to invest until the moment when the marginal return on investment is equal to the rate of return of equivalent investments in the capital market. This moment corresponds to the point of intersection of the interest rate line with the investment opportunity line.

GNI can be considered as limit level payback or return on investment, which is a criterion for the feasibility of making an investment.

IN real life Individuals are not limited to investing in securities in the capital market. They can also purchase equipment, machinery and other real assets. Therefore, in addition to the line depicting the profitability of purchasing securities, we can also draw a line of investment opportunities, which will show the profitability of purchasing real assets. The return on the “best” project may be significantly higher than the return on the capital market, so the investment opportunity line may be very steep. But if the individual does not have inexhaustible inspiration, the line gradually levels out. This is shown in Figure 2-4, where the first $10,000 investments provide a further cash flow of $20,000, the next $10,000. give a cash inflow equal to only $15,000. In economic parlance, this is called the diminishing marginal return on capital.

The internal rate of return is sometimes considered as a limiting level of return on investment, which can be a criterion for the advisability of additional investments in a project.

Note that although the firm continues to grow operating income and makes new investments after the fifth year, these marginal investments do not create any additional value since they earn at the cost of capital level. The straightforward conclusion is that it is not growth that creates value, but the combination of excess returns and growth. This leads to a new perspective on the quality of growth. A firm can increase its operating income at a rapid rate, but if it does so by making large investments at or below its cost of capital, then it will not be creating value, but actually destroying it.

To calculate present value, we discounted the expected future return at the rate of return Σ yielded by comparable alternative investments. This rate of return is often called the discount rate, marginal rate of return, or opportunity cost of capital. It is called opportunity cost because it represents the income that an investor gives up by investing in a project rather than in securities. In our example, the opportunity cost was 7%. The present value was obtained by dividing $400,000. by 1.07

Risk premiums always reflect the risk contribution of a portfolio. Let's say you are building a portfolio. Some stocks will increase portfolio risk, and you will only buy them if they also increase your expected return. Other stocks will reduce portfolio risk, and so you are willing to buy them even if they reduce the portfolio's expected returns. If the portfolio you choose is effective, each type of investment you make should work equally hard for you. Thus, if one stock has a greater marginal impact on portfolio risk than another, the former should provide a proportionately higher expected return. This means that if you plot a stock's expected return against its marginal risk contribution to your efficient portfolio, you will find that the stocks fall along a straight line, as in Figure 8-8. This is always true: If a portfolio is efficient, the relationship between each stock's expected return and its marginal contribution to portfolio risk should be straightforward. The opposite is also true: if there is no direct relationship, the portfolio is not effective.

As we will show in Part V, the same relationship holds for the real economy. In an economy where there is no government that takes a portion of citizens' income in the form of taxes, equilibrium requires that saving equal investment. Moreover, if this is true, then the return on savings should have a certain relationship with the marginal product of capital - although in the real world the relationship between these quantities is more complex than in the Robinsonade model. Relationship between investment and interest rate When the island economist had the opportunity to earn more by making a loan than he could get at the equilibrium level of saving and investment, he decided to make a loan. This loan was alternative way savings of 50 pineapples, so the economist's total savings remain the same. However, since he agreed to lend 50 pineapples to natural scientists, he abandoned the original plan of pineapple cultivation, i.e., capital investment. He did this because by giving a loan he could get more income. The higher market interest rate (60%) forced the economist to reduce the amount of planned investment.

Interest, being the price paid in any market for the use of capital, tends to such an equilibrium level at which the total demand for capital in this market at a given rate of interest is equal to the total fund (84) entering the market at the same rate of interest. If the market we are considering is small - say, a single city or a single industry in a developed country - the growing demand for capital in that market will be immediately met by a growing supply of capital through inflows from neighboring areas and other industries. But if we consider the whole world or even just one large country as a single capital market, the aggregate supply of capital can no longer be interpreted as changing rapidly and significantly under the influence of changes in the interest rate. After all general fund capital is the result of labor and assumptions, and additional labor (85) and additional assumption, which would be prompted by an increase in the rate of interest, cannot quickly reach any significant value in comparison with labor and abstinence, the result of which is the already existing total fund of capital. Therefore, a widespread increase in the general demand for capital will for some time be associated not so much with an increase in supply as with an increase in the rate of interest (86). This growth will induce capital to partially withdraw from those areas of use where its marginal utility is lowest. Slowly and gradually - this is exactly how an increase in the rate of interest will increase the entire capital fund" (87). "It is never out of place to recall that talking about the rate of interest in relation to old capital investments can only be done in a very limited sense (88). For example, we can apparently say that a capital of approximately 7 billion pounds. Art. invested in various sectors of the English economy at a net interest rate of about 3%. But this way of expression, although convenient and justified for many purposes, cannot be considered strict. What should be said is that if the rate of net interest on the investment of new capital in each of these industries (i.e., on marginal investment) is taken to be about 3%, then the total net income generated by the entire mass of capital invested in various industries , and capitalized on a 33-year payback basis (i.e. based on a 3% rate), would be approximately £7 billion. Art. The point is that the value of capital already invested in reclaiming soil, erecting a building, laying a railroad, or making a car is the discounted value of the future earnings (or quasi-rents) expected from it. And if its prospective profitability decreases, then its value will correspondingly decrease, which will now be the capitalized value of this lower income minus deductions for depreciation." (89)

The latter stages of a boom are characterized by an optimistic estimate of the future returns of capital goods, sufficiently distinct to balance the influence of the growing surplus of these goods and the increasing costs of their production, and also, probably, the rise in the rate of interest. The very nature of organized investment markets, dominated by buyers often uninterested in what they are buying, and speculators more concerned with anticipating the next change in market sentiment than with making informed estimates of future returns on capital goods, is such that when a market dominated excessive optimism and excessive purchasing, panic begins, it acquires sudden and even catastrophic force (130). Moreover, fear and uncertainty in the future, which accompany a sharp drop, naturally give rise to a rapid increase in liquidity preference, and consequently, an increase in the interest rate. The collapse of the marginal efficiency of capital, which tends to be accompanied by an increase in the rate of interest, can seriously exacerbate the decline in investment. And yet, the essence of the matter lies in a sharp drop in the marginal efficiency of capital, especially those types of capital whose investments in the previous phase were the largest. Liquidity preference, excluding cases associated with increased trade and speculation, increases only after the collapse of the marginal efficiency of capital.

Let's return to what happens during a crisis. While the boom lasts, many new investments provide good current income. The collapse of hopes comes from sudden doubts about the expected profitability, perhaps because current profits show signs of contraction as the stock of newly produced capital goods continues to increase. If, at the same time, current production costs are regarded as too high compared to what they should be later, there is another reason for the deterioration in the marginal efficiency of capital. Once doubt arises, it spreads very quickly. Thus, in the initial stage of the crisis there will probably be many capitals whose marginal efficiency has become negligible or even turned into a negative value. But the period of time that must pass before the shortage of capital due to its use, deterioration and obsolescence becomes quite obvious and causes an increase in its marginal efficiency may be a fairly stable function of the average life of capital in a given period. If the characteristic features of the period change, then at the same time the typical time interval will change. If, for example, we move from a period of population growth to a period of population decline, then the defining phase of the cycle will lengthen. But, as can be seen from the above, there are good reasons why the duration of the crisis should be in a certain dependence on the service life of durable capital property and on the normal growth rate in a given historical period.

Incentives for saving and investment. High marginal tax rates also significantly reduce the rewards for saving and investing. Let's say you set aside $1,000 in savings. at 10% per annum, which gives you 100 dollars. interest income per year. If your marginal tax rate is, say, 40%, your after-tax interest earnings would be reduced to $60, and your after-tax interest rate would be only 6%. In such circumstances, even if you are willing to save (i.e., forego current consumption) if your savings have a 10% return, you might choose to use all of your income for consumption if your savings have only a 6% return.

Let us remember that saving is a prerequisite for investing. Therefore, proponents of supply-side economics propose reducing marginal tax rates on savings. They also call for a lower tax on investment income to encourage people to invest increasing amounts of their savings in the economy. One of the determinants of investment spending is its net after-tax yield.

Let's consider the limiting case when B(t,t) and B(t,t-l) are not equal to zero and the expected time between transactions is approximately equal to the correlation intervals under study, in our case - 5 minutes. The idea is that you don't want to trade too often, otherwise you'll end up paying too much transaction costs. The average return within a single correlation time frame that you can get using this strategy, assuming the order is executed in that 5 minute time frame, is 0.03% (to account for prediction errors, we use a more conservative estimate than scale 0.04% for 1 minute used previously). Over the course of a day, this gives an average gain of 0.59%, which in a year would be 435% with reinvestment or 150% without reinvestment. Such a small correlation leads to a significant return if transaction costs are not taken into account and do not exist slippage effect (slippage occurs as a result of the fact that market orders are not always executed at the price specified in the order due to the limited liquidity of the markets and the time required to execute the order) It is clear that even small transaction costs, as in our case, 0.03 % or 3 per 10,000 investment is enough to destroy the expected profit when trading according to the strategy used. The problem is that you can't trade infrequently to reduce transaction costs, because if you do, you lose the correlation-based forecasting feature that only works within a 5-minute horizon. From this we can draw the following conclusion that the difference correlation is not enough for the strategy described above to be profitable due to imperfect market conditions. In other words, market liquidity and efficiency drive the level of correlation, which is comparable to the absence of near-term arbitrage opportunities.

At the optimum, the return on the marginal investment is exactly as great as the market interest rate. Therefore it is true

IN this section The possibility of using models that link risk and return in relation to real estate investments is being considered. Along the way, we'll discuss whether the marginal investor's highly diversified assumption holds true for real estate investing and, if so, how best to measure model parameters—such as the risk-free rate, beta, and risk premium—to estimate the value of equity. capital We will also look at real estate investment risks that are not adequately addressed in traditional risk and return models, and discuss how to incorporate them into your assessment.

One of the first researchers to estimate the magnitude of the net losses of a monopoly was the American scientist Harberger, who in 1954 calculated the net losses for the US economy (the net loss triangle is often called the Harberger triangle in his honor). He estimates that the net loss in US manufacturing was about 0.1% of US GNP. However, there is a point of view that the amount of net losses in this study is underestimated due to incorrect calculations. In his calculations, Harberger assumed the elasticity of demand equal to 1. But this assumes that the marginal cost of production of goods by a monopolist is equal to zero. The Lerner index was estimated based on data on the deviation of the rate of return on investments in a given industry from the average return on industry. But if part of the industry is monopolized, then the average rate of return will include monopoly profit, and, therefore, its level will be higher than in conditions of free competition. If by normal profit we mean the profit received

Several well-known works of Fisher are specifically devoted to interest: Valuation and interest (I896)9, Norm of interest (907)]a, Theory of interest (1930)". In them, he associated interest primarily with a purely psychological, associated with impatience, preference for present goods for future its expression in agio - the difference in the utility of goods relating to different points in time.In addition, the amount of interest, in his opinion, is influenced by the marginal rate of return on investments, which characterizes investment opportunities.

In cases where the deductibility of interest is not provided, financing from borrowed funds requires the enterprise to obtain a higher pre-tax return on investment than in other cases. If the assumption of diminishing marginal returns to capital is met, this means that in such cases, given the unavailability or limitation of financing, the equilibrium level of investment is set at a level lower than in the absence of taxation. If the tax depreciation rate is lower than the economic depreciation rate, the disincentive effect can be significant. There have been no published studies on economic depreciation rates in the modern Russian Federation. However, the Unified norms of depreciation charges inherited from Soviet times for the complete restoration of fixed assets in the Russian Federation, approved by Resolution of the Council of Ministers of the USSR dated October 23, 1990 No. 1072 and in force until Chapter 25 of the Tax Code came into force, were outdated and did not meet the needs market economy By

It can be assumed that with an increase in the capital stock, the latter ratio should at least not decrease. The second term on the right side of the last expression is equal to half the marginal return on capital, and it is positive if the implementation of the capital investment occurs immediately at the time of capital acquisition. The standard assumption is a decrease

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The marginal return of a factor is equal to the increase in the firm's total income resulting from the use of an additional unit of that factor. Thus, the marginal return to labor (MRPL) is equal to the firm's marginal revenue (MR) multiplied by the marginal product of labor (MPL).

A firm's marginal revenue represents the increase in revenue resulting from the additional production of one unit of output.

The marginal product of labor represents the increase in output resulting from the use of an additional unit of labor.

The value of the marginal profitability of labor shows what the attraction of one additional employee. However, hiring an employee simultaneously increases costs by the amount of the employee’s salary.

Consequently, the net effect of attracting an additional employee, which affects the firm’s profit, is equal to the marginal profitability minus the increase in the wage fund.

The rule of optimal hiring for a company is: expand the scale of employment as long as the marginal profitability of labor is above the wage level; reduce the number of employees as soon as the marginal return falls below the wage level.

Thus, the number of employees is optimal if the following condition is met:

Wage = marginal return to labor: W = MRPL

Wages as the price of labor. Labor is a factor of production, and wages - at the cost of using labor employee. There are nominal and real wages. Nominal wages They call the amount of money received by an employee real - the totality of goods and services that can be purchased with this money, taking into account its purchasing power.

In conditions perfect competition the price of labor is formed like the price of any other product. This means that all workers receive equal wages, which does not depend on which company they work for, and is perceived by the company as a predetermined value. Therefore, for an individual firm, the supply of labor is perfectly elastic. The wage level itself in conditions of perfect competition is maximum - the worker, according to the theory of marginal productivity, receives the full product of labor: MRC = w. That's why marginal cost Firms' labor equals wages. In conditions where the level of wages is not related to the behavior of the company, only the number of workers hired depends on the entrepreneur.

Under conditions of perfect competition marginal revenue equal to the issue price: MR=P. If a firm maximizes profit, then it hires workers until the marginal return on labor is equal to wages (MRP = w), i.e., until the marginal return from using the factor (labor) is equal to costs associated with its purchase (i.e. wages).

Topic 4.2 Profit:

1) profit as the factor income of the entrepreneur;

2) profit distribution .

Profit as a factor income of an entrepreneur. Profit is the income of a company. An entrepreneur is more interested in the mass of profits - the gross profit received from the sale of all goods.

When calculating gross (total, total) profit, the amount of sales is first determined (cash income from the sale of all goods produced over a certain period, say, a year). This amount can be calculated by multiplying the average price per item by the total number of goods sold (TR = P x Q).

The gross profit mass PF is the difference between sales (TR) and total production costs (TC): PF = TR - TC.

Typically, the rate of profit refers to the annual rate of profit: the ratio of the profit received during the year to the total capital advanced.

Owners of capital naturally have a vested interest in increasing their wealth by increasing the rate of profit.

The rate of profit is determined mainly economic factor- the amount of profit. Anything that multiplies this mass directly affects the profitability of the business.

Profitability also depends on the structure of funds advanced for production, namely, on the share of expenses for remuneration of workers. Let us assume that two enterprises use the same amount of advanced capital. But in the first of them, relatively more funds were spent on hiring work force. Then it is here - in front of others equal conditions- more profit will be created, and therefore the rate of profit will be higher.

The annual rate of profit is affected by the turnover rate of funds spent on production. When this speed increases, the money spent by him, including those used for wages, is returned to the entrepreneur faster. In this case, with the same total amount of capital, production increases, profits increase, and, as a result, profitability increases.

Saving costs on means of production contributes to an increase in the rate of profit. Savings are achieved through the introduction of advanced equipment, technology and labor organization, by increasing the number of work shifts during the day, etc. As a result, the cost of production decreases and, accordingly, profits increase.

Finally, profit margins are affected by economies of scale. In practice, there is a tendency that expresses the advantages of large-scale production over small-scale production.

Profit distribution. The distribution of profits is shown schematically in Figure 1.1

Figure 1.1 - Gross profit distribution

First of all, amounts going “outside” are subtracted from the gross profit. This includes rent for the use of someone else’s land or buildings (owned differently), as well as interest on borrowed funds. In addition, the company contributes taxes to the budget of the state and local authorities, invests funds in charitable and other funds. The remainder of the funds forms net profit. It is used for the production and social needs of the enterprise, including accumulation (expansion of production), environmental protection, training and retraining of personnel, social needs of the enterprise’s employees and other purposes.

Finally, from the net profit, the businessman receives the entrepreneurial income due to him personally. In conditions joint stock company The part of the profit intended as personal income is distributed among all shareholders who contributed to the joint capital.

Given the current situation modern conditions In the distribution of gross profit, as its size increases, the property of entrepreneurs and the state increases, and it also becomes possible to increase the income that goes into personal consumption not only of the employees of each company, but also of other members of society who receive public benefits and various types of benefits from the state and enterprises.

Topic 4.3 Income from property:

essence and forms of credit;

formation of a market-type credit system in the Republic of Kazakhstan;

interest as factor income of the owner of capital;

land is the main factor of production in agriculture.

The essence and forms of credit. Credit is a form of movement of loan capital, i.e., monetary capital provided on loan. It expresses the relationship between lenders and borrowers, while ensuring the transformation of free money capital into loan capital.

Necessity b credit in a market economy is determined by the very nature of capital and the patterns of its circulation and circulation in the process of reproduction.

Modern production constantly needs to attract borrowed funds and transfer them from one sector of the economy to another. This is due to a number of factors at play:

1) there is always a gap in time from the moment of investment to the moment of return of funds advanced into production, due to the different duration of production cycles;

2) there is an objective need to minimize production and distribution costs through the optimal combination of enterprises’ own and borrowed funds;

3) in many sectors of the economy there is seasonality in production (agriculture, etc.);

4) very often there is a need for a one-time and large-scale investment of funds for the development, reconstruction or expansion of production in certain sectors of the economy.

The most concentrated expression of the essence of credit is its functions. In a market economy, credit performs the following fundamental functions:

1) credit performs the function of accumulation and mobilization of money capital, which historically made it possible to significantly expand the scope of social production;

2) the loan performs the function of redistributing monetary capital. Thanks to this, free funds of the population, enterprise profits and state revenues are converted into loan capital and, through the credit mechanism, redistributed on the basis of payment and repayment to the most profitable areas production or priority sectors of the national economy;

3) credit helps reduce circulation costs due to the replacement of cash in circulation with credit money - bills, checks and banknotes;

4) credit is an important means of accelerating the process of concentration and centralization of capital. It is actively used in competition, promotes the process of acquisition and merger of companies, thus acting as one of the factors in the transformation of individual enterprises into joint-stock companies and partnerships;

5) credit is used in a market economy as a tool for its regulation.

Credit regulation of the economy is a set of measures carried out by the state in order to optimize the volume and dynamics of credit, regulate the loan capital market and the country's economy as a whole. Since the commodity on the loan capital market is temporarily free funds, it is obvious that the temporary nature of the release of these funds also implies the temporary nature of their transfer. Thus, the repayment of loan capital is an objective process and is one of the main properties of a loan. The repayment of the loan presupposes its maturity, since the money is lent for a certain period.

Another feature of credit is that a credit transaction is always an operation based on trust, since one of the two parties involved must wait for the debt to be repaid. Therefore, the creditor has the right to demand more or less significant guarantees to the extent of his trust. This puts the material security of a loan among its main properties.

Due to the fact that borrowers use capital that does not belong to them, i.e., other people's money, in their own interests, in a market economy they inevitably must pay for the right to use the loan provided to them. This leads to another important property of a loan - its repayment. The loan is repaid through the loan interest, that is, that part of the profit that the borrower pays to the lender. Loan interest appears as an equivalent to the consumer value of a loan, generating the movement of funds in the loan capital market.

Any transaction in any market involves some kind of benefit. The profitability of a cash loan transaction is determined by the interest rate , which is the ratio of the amount of loan interest to the amount of loan capital. The interest rate depends on the relationship between supply and demand on the loan capital market, is a dynamic value and is determined by the specific economic situation.

Formation of a market-type credit system in the Republic of Kazakhstan. Currently, the concept of a credit system includes two aspects:

credit system as a set of credit relations, forms and methods of lending ( functional aspect);

credit system as a set of credit and financial institutions that accumulate free funds in the loan capital market and lend them out (institutional aspect).

In the first aspect, the credit system is represented by banking, commercial, consumer and other types of lending. All these forms of credit have their own specific features of credit relations and their inherent lending methods.

Relationships regarding credit are implemented by specialized credit organizations, which form the second aspect of understanding the credit system. In this aspect, the credit system is a set of financial intermediaries operating in the loan capital market.

The main players in the credit system in a market economy are banks. It should be noted that the credit system is a broader and more capacious concept than banking system, which is only a collection of banks operating within a certain credit system.

The modern credit system is the main link in the loan capital market and consists in turn of the following main institutional groups (tiers):

central (issuing) bank;

banking system (commercial banks, savings banks, investment banks, mortgage banks, other specialized banks);

insurance sector ( Insurance companies, pension funds);

specialized non-banking financial institutions (investment companies, financial companies, charitable foundations, etc.).

In the Republic of Kazakhstan, as in most CIS countries, there is a two-tier banking system: the first level is the Central Bank - the National Bank of the Republic of Kazakhstan, and the second level is a network of commercial banks.

A commercial bank is a credit organization designed to attract funds and place them on its own behalf on the terms of repayment, urgency and payment.

The main purpose of the bank is to mediate the movement of funds from lenders to borrowers and from sellers to buyers. Feature commercial banks is that the main purpose of their activities is to make a profit (this is actually the “commercial” basis of their existence in a market economy).

The National Bank is the bank that heads the country's credit system, has a monopoly right to issue banknotes and implements monetary policy in the interests of the national economy.

Let's consider the relationship between these subjects. The National Bank determines the monetary base. The National Bank can change the value of this indicator by conducting operations on open market. Open market operations are the purchase or sale by the National Bank of government securities in the financial markets of the country. Buying them increases the money supply, and selling them decreases it. The National Bank determines the norm of required bank reserves. The ratio of required reserves to bank deposits affects the volume of money supply. The volume of money supply is also influenced by the proportion in which the population divides its money into cash and bank deposits.

Interest as a factor income of the owner of capital. Capital is a material factor of production.

Capital, in the broad sense of the word, is any resource created for the purpose of producing more economic goods.

There are two main forms of capital - physical (tangible) capital (machines, buildings, structures, raw materials, etc.) and capital in value form.

Physical capital is, in turn, divided into fixed capital, which includes real durable assets such as buildings, structures, machinery, equipment and working capital spent on the purchase of funds for each production cycle: raw materials, basic and auxiliary materials.

A return on capital will be generated only if the owner of the capital transfers it for productive use to an entrepreneur (or becomes an entrepreneur himself). In this case, capital lent for a time must be returned incrementally. This increase, returned to the owner of capital, is called interest. Interest is the price paid to the owner of capital for the use of his funds over a certain period of time. The analysis usually considers capital exclusively in monetary form, implying that money is used to buy physical capital.

The interest rate depends on the supply and demand for borrowed funds. The demand for borrowed funds depends on the profitability of entrepreneurial investments, the size of consumer demand for credit and demand from the state, organizations and institutions.

There are nominal and real interest rates. The nominal rate shows how much the amount that the borrower returns to the lender exceeds the amount of the loan received. The real rate is the interest rate adjusted for inflation, i.e. expressed in monetary units of constant purchasing power. It is the real rate that determines decisions about the feasibility (or inexpediency) of investments.

Land is the main factor of production in agriculture. The peculiarity of land as an economic resource is its limitation. Unlike capital, land is immobile.

Factors affecting land supply are fertility and location. Therefore, when we talk about limited land, we mean land of a certain quality located in a certain place. Naturally, the amount of good land around a particular large city or even an individual farm is doubly limited: both in quality and in quantity.

Fertility, for example, depends on the quality of the soil, the climate, the nature of the machinery used, the labor skills and production experience of those who work the land, etc.

Economic rent is payment for a resource whose supply is strictly limited. Land rent is a special case of economic rent. The word "rent" translated from French (French rente from Latin reddita) means "given away." The etymology of this word thus reproduces the fact of the transfer of part of the product (or income) produced by the farmer to the owner of the land. Land rent is a payment for the use of land and other natural resources, the supply of which is strictly limited. The supply of land and other natural resources acts as a stock, rent as a flow.

5 Introduction to Macroeconomics

Topic 5.1 National economy:

1) national economy as a system;

2) characteristics of macroeconomic indicators;

National economy as a system. On a national scale, the economy is characterized as a macrosystem. Its main elements are:

firstly, total production - the total set of enterprises that create all the variety of goods;

secondly, the total social product is the entire sum of goods (products and services) produced in the country over a certain period;

thirdly, aggregate needs - the total sum of the needs of all members of society.

Now we have to figure out how all the elements of the macrostructure are interconnected.

First of all, there is a direct connection between them. It consists in the fact that social production acts to create an aggregate social product that satisfies all the needs of society.

However, there is also Feedback. It manifests itself in the fact that increased aggregate needs influence changes in the structure of the aggregate social product, which allows for structural changes in social production.

Clarification of these forward and backward connections allows us to discover the main goal of macroeconomic regulation. Its goal is to constantly maintain national economic proportionality. We are talking about two interrelated relationships.

Macroeconomic demand- this is the amount of money that members of society are willing to spend on the purchase of goods and services to satisfy all needs. Volume aggregate demand depends on the following factors:

price level;

income of the population;

distribution of income for consumption (current demand) and accumulation (demand deferred for the future);

taxes (part of income given to the state);

government procurement (state demand);

offers of money from credit institutions.

Macroeconomic proposal represents the sum of goods and services that their manufacturers and resellers sell to all customers. The volume of aggregate supply is determined by the following factors:

market price level;

potential production volume in the country;

level of production costs;

commercial benefit of its release.

There are certain relationships between macroeconomic demand and macroeconomic supply. They act as end-to-end interdependencies. Thus, the structure of aggregate demand (the set of all paid needs) affects the composition of the aggregate supply (the set of all goods and services sold), and thereby affects the structure of national production (the sum of all industries and types of economic activity ultimately necessary to satisfy effective demand society). Feedback also operates: the structure of all production largely determines the structure of aggregate supply and, through the market, predetermines the entire diversity of consumer demand.

The “law of the market” ensures equality of supply and demand volumes (which means economic crises are impossible), balance of savings and investments, and full employment of the labor force (unemployment is excluded). This is how - purely theoretically, speculatively - the neoclassics solved the problem of achieving stable (proportional) development of a market economy.

Characteristics of macroeconomic indicators. To measure the results of the functioning of the national economy, various macroeconomic indicators are used in theory and economic practice.

A number of such indicators are designed to assess the value of the total volume of national production. These include gross social product (GSP), final social product (FSP), net social product (NSP), net national product (NNP), gross domestic product (GDP), national income (NI), personal income ( LD), intermediate product (IP)

The relationship between various macroeconomic indicators can be presented as follows:

VOP-PP = KOP; KOP-A = CHOP = ND = FN + FP + CHE

In economic theory and statistics of foreign countries, indicators calculated on the basis of the system of national accounts are used to characterize the final results of annual production. The standard system of national accounts, developed by the UN Statistical Commission, has been used in world practice since 1953. Currently, national accounts are compiled in more than 100 countries around the world. In Kazakhstan, the national accounting system was introduced in 1993.

The following macroeconomic indicators are calculated on the basis of the SNA:

Gross National Product, representing the market value of all final goods produced in the country during the year. It is close in its economic meaning to the CPC indicator, but exceeds it by the cost of non-material production services.

Gross domestic product. This indicator is a kind of modification of GNP, but unlike the latter, it covers the results of activities in the territory of a given country of all economic entities, regardless of their nationality. The difference between GNP and GDP is twofold. On the one hand, when calculating GDP, the amount of income from the use of the resources of a given country abroad (wages, interest, dividends, etc.) is subtracted from GNP. On the other hand, when calculating GDP, similar income of foreigners received in a given country is added to GNP . For example, dividends received by foreign investors are included in the GNP of their country of residence and in Country's GDP, whose corporation shares were acquired by foreigners.

Net national product represents the amount of final products and services remaining for consumption after the replacement of decommissioned equipment. It is less than GNP by the amount of depreciation charges.

National income characterizes the amount of income of all suppliers of production resources with the help of which private enterprise is created. The only component of NNP that does not reflect the current contribution of economic resources is indirect business taxes. Therefore, the value of the latter, when calculating ND, is subtracted from the monetary volume of NNP.

Personal income shows how much money goes for personal consumption of the population, and as such reflects the redistribution processes in the ND movement. When calculating personal income, corporate income taxes, the volume of their retained earnings and the amount of social insurance contributions are subtracted from personal income, but transfer payments to the population (pensions, scholarships, benefits) are added.

To characterize the income that the population can spend at their own discretion, an indicator such as disposable income

BOOK FOUR

INCENTIVE TO INVESTMENT

I define with the price of his offer. ultimate efficiency

. It follows that incentive to invest depends on

It's important to understand

The volume of investment is influenced two types of risk A. The first one is

lender's risk third type of risk

the future influences the present

CHAPTER 15

BOOK FIFTH

CASH WAGES AND PRICES

CHAPTER 20 Busy Function

There are two reasons why the replacement of the ordinary supply curve by an employment function is in complete agreement with the methods and purposes of this book. Firstly , occupancy function expresses the phenomena that interest us in the units we have chosen without involving any other units of measurement, the quantitative determination of which is doubtful. Secondly , this function is more suitable than the usual supply curve for analyzing the problems of industry and production as a whole, as opposed to the problems of a particular industry or an individual company, for which external conditions are assumed to be given and unchanged.

Thus, inevitable price volatility cannot affect activities of entrepreneurs, but only funnels existing random wealth into the pockets of a lucky few. This fact has gone unnoticed in some contemporary debates about price stabilization policies. In a society subject to change, such a policy cannot be entirely successful.

We have shown that if effective demand is insufficient, then underemployment occurs in the sense that there are unemployed people who would be willing to work for less than the existing real wage. As effective demand increases, employment increases while maintaining existing real wages or even lowering them, until a point is reached where there is no longer a surplus of labor to be used based on the then established level of real wages. In other words, it will no longer be possible to obtain an additional number of people unless money wages begin to rise faster than prices.

However, the significance of this finding is limited by a number of practical caveats.

1. rising prices may mislead entrepreneurs and induce them to increase employment beyond the level at which their individual profits, measured in units of output, become maximum. In other words, at the new price level, they may underestimate the marginal cost of use.

2. an increase in prices will lead to a redistribution of income to the benefit of the entrepreneur and the disadvantage of the rentier, and this may affect the propensity to consume. However, this process can not only begin when full employment has already been achieved, but will be continuous throughout the time that costs increase.

The visible asymmetry between Inflation and Deflation may cause some confusion. While deflation of effective demand below the level required for full employment will reduce both employment and prices; inflation above this level will only affect prices. This asymmetry is simply a reflection of the fact that wage-earners always able to refuse work on a scale at which real wages fall below the marginal burden of labor for a given level of employment, they are not able to demand the provision of work on a scale at which real wages do not exceed the marginal burden of labor at a given level of employment.

CHAPTER 21 Price Theory

I consider it wrong to divide Economic Science into the Theory of Value and Distribution, on the one hand, and the Theory of Money, on the other. The true boundary must lie between the Theory of a Single Industry or a Firm, which examines the remuneration of factors and the distribution of resources between various ways of using a given quantity of them, and the Theory of Production and Employment in general.

Possible complications that will actually affect the course of events:

1) effective demand will not change in exact proportion to the quantity of money;

2) since resources are not homogeneous, there will be diminishing rather than constant returns as the degree of their use gradually increases;

3) since resources are not equal in their degree of efficiency, the supply of some goods will be inelastic when there are still unused resources suitable for the production of other goods;

4) the wage unit will tend to increase before full employment of all resources is achieved;

5) the remuneration of the funds included in the marginal costs of production will not change in the same proportion.

The increase in effective demand will be spent partly on increasing the rate of resource use and partly on raising the price level. Thus, instead of constant prices in the presence of unused resources and prices rising in proportion to the amount of money in conditions of full use of resources, we practically have prices gradually increasing as the employment of factors increases. That's why Price Theory , i.e. Analyzing the relationship between changes in the quantity of money and changes in the price level in order to determine the elasticity of prices in response to changes in the quantity of money must address the five complicating factors listed above.

1. A change in the quantity of money affects the amount of effective demand by influencing the interest rate. If the matter were limited to this, then the quantitative effect could be derived from three elements: a) the schedule of liquidity preference; b) a graph of marginal efficiency, and c) an investment multiplier.

2. The presence of diminishing or constant returns depends on whether whether employees are remunerated strictly in proportion to their productivity. Thus, an increase in output will be combined with a rise in prices, regardless of even any change in the unit of wages.

3. If there were perfect equilibrium in the relative quantities of specialized unused resources, then the point of full use would be reached for all of them simultaneously. As production volume increases, a whole series of “bottlenecks” will arise, when the supply of certain goods ceases to be elastic, and their prices begin to rise to the level necessary to switch demand to other goods and services.

The general price level will not rise very much as output increases as long as there are still efficient unused resources of all kinds. But as soon as production volume increases so much that bottlenecks begin to appear, we can expect a sharp rise in prices for some goods.

4. The upward trend in the wage unit may appear even before full employment is achieved. A proportion of any increase in effective demand will be absorbed by the upward trend in the wage unit.

Thus, in addition to the final critical point of full employment, with the achievement of which money wages must rise in response to an increase in effective demand expressed in monetary units in the same proportion as the prices of goods purchased with wages increase, we have a consistent series earlier semi-critical points, upon reaching which an increase in effective demand will also cause an increase in money wages, although not in exact proportion to the increase in the prices of goods purchased with wages.

5. The remuneration rates of different factors, expressed in terms of money, will exhibit varying degrees of inflexibility, and these factors may also have different elasticities of supply in response to changes in the monetary remuneration offered. If not for this, then the price level would be determined by two factors: the unit of wages and the size of employment. The most important element of the marginal cost of production, which will vary in a different proportion than the unit of wages and fluctuate over much wider limits, is marginal cost use.

The long-run relationship between national income and the quantity of money will depend on liquidity preferences, and the stability or volatility of prices in the long run will depend on the intensity of the upward trend in the unit of wages relative to the rate of growth in the efficiency of the production system.

BOOK FOUR

INCENTIVE TO INVESTMENT

CHAPTER 11 Marginal efficiency of capital

I define marginal efficiency of capital as a value equal to the discount rate that would equalize the present value of a series of annual incomes expected from the use of capital assets during their service life, with the price of his offer. If for some time there is an increase in investment in any this type capital, its ultimate efficiency decreases as investment increases , - because the expected income will fall with an increase in the supply of this type of capital, because,

llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllan increased load on the capacity for the production of the corresponding capital goods will causing an increase in their supply price. Capital efficiency depends on the expected return on capital, not just its current return.

Thus, for each type of capital, we can construct a graph showing how much investment in this type of property must increase during a given period in order for its marginal efficiency to fall to any given value. It follows that incentive to invest depends on schedule of investment demand and the interest rate.

It should be noted that the expectation of a fall in the rate of interest will have a downward effect on the marginal efficiency of capital schedule, since it means that output from equipment manufactured today will have to compete for some part of its life with output from equipment that is efficient and has lower net revenues. This expectation will not have a large depressive effect, since ideas about future interest rates on loans of different terms will be partly reflected in the aggregate of rates in force today. But some depressive effect is still possible, since products released towards the end of the service life of currently produced equipment may will have to compete with products produced by newer equipment corresponding to a lower rate of return due to the decline in the rate of interest in the periods following the end of the service life of the equipment currently produced.

It's important to understand the dependence of the marginal efficiency of a given capital fund on changes in expectations, for it is precisely this dependence that mainly determines the susceptibility of the marginal efficiency of capital to the rather sharp fluctuations that explain the economic cycle. A series of successive rises and falls can be described and analyzed in connection with the fluctuations of the marginal efficiency of capital relative to the rate of interest.

The volume of investment is influenced two types of risk A. The first one is risk of the entrepreneur or borrower , arising from doubts about whether he will actually be able to receive the expected income he is counting on. If a person puts his own money at stake, then we are talking only about this type of risk.

Where there is a system of borrowing and lending money, by which I mean the making of loans on real security or on the good name of the borrower, there is a second kind of risk - lender's risk . It can be associated either with doubt about the debtor's honesty, i.e. with the danger of deliberate bankruptcy or other attempts to evade fulfillment of obligations, or with the possibility that the amount of security will be insufficient, i.e., with the danger of involuntary bankruptcy due to unjustified calculations of the borrower. One could also add here third type of risk - one that is associated with the possible a change in the value of a unit of the monetary standard, as a result of which a money loan is to a certain extent a less reliable form of wealth than real property. The first type of risk represents, in a certain sense, necessary social costs, although they can be reduced both through mutual equalization of risk and by increasing the accuracy of foresight. But the second type of risk is a net addition to the cost of the investment that would not exist if the lender and borrower were one and the same entity.

The marginal efficiency of capital schedule has fundamental importance, because mainly through this factor (much more than through the interest rate) the expected the future influences the present. The erroneous definition of the marginal efficiency of capital as the current income from capital equipment (this would be true only in a static situation where there is no changing future that could affect the present) led in theory to a severing of the connection between the present and the future. Even the rate of interest is essentially a short-term phenomenon; and if we reduce the marginal efficiency of capital to the same situation, we deprive ourselves of any possibility of directly including the influence of the future in the analysis of the existing equilibrium.

It is precisely because of the existence of long-life equipment in the field of economics that the future is linked to the present. Therefore our general principles thinking corresponds to the conclusion that calculations for the future must have an impact on the present through the prices of demand for equipment with a long service life. The scale of investment depends on the relationship between the rate of interest and the schedule of the marginal efficiency of capital, which relates this value to the size of current investments, and the marginal efficiency of capital reflects the relationship between the supply price of capital property and its expected income.