What is Business Investment?
Business investment is, together with consumption, one of the two most important components of aggregate demand. This consists in the act by which you invest in certain assets with the aim of obtaining income or income over time. In other words, it consists in giving up current and certain consumption, in exchange for obtaining future benefits spread over time. Business Investment can be classified in two types:
1. Temporary Investments: these are considered to be those that are carried out temporarily. The idea of these investments is to obtain income from the resources in a short period of time that does not exceed the year or the normal cycle of operations of the company. To achieve these benefits, capital must be invested in high quality securities.
2. Long-term investments: these involve the use of the economic surplus in order to obtain greater long-term benefits. Only long-term investments are those that demonstrate that the company carrying out such investment intends to remain the owner of said investment for more than one year its above the normal cycle of operations. In a more technical way, it is the investment account for Individuals with Business Activity or Moral Person with attractive returns. You will also have the additional services you need to manage your company’s money and carry out financial operations.
Business investment plays two important roles in any economy. On the one hand, it contributes to increasing demand, since this pulls the demand when companies acquire investment or capital goods from other companies, which in turn affects the production and employment of the short economy as a whole term.
On the other hand, business investment raises the productive capacity installed in a country, through the accumulation of capital goods and, therefore, fosters long-term economic growth, with the consequent generation of wealth in the investment company environment. Business investment is therefore necessary for a business to function and perform properly.