What does the process of reproduction of fixed assets mean? What does it have in the modern world? How is the reproduction of fixed assets? These, as well as a number of other issues will be considered in the framework of this article.
general information
Under market conditions, policies regarding the reproduction of fixed assets are extremely important. After all, it determines the qualitative and quantitative state of the means of production. At the macro level, the main task is to create favorable conditions for all economic entities so that they can engage in simple and advanced reproduction, acquire new equipment, reconstruct and technically re-equip funds. This task is carried out thanks to depreciation, tax and investment policies.
What is the reproduction of fixed assets?
This is a continuous renewal process that takes advantage of new acquisition opportunities, reconstruction, modernization, major repairs and technical re-equipment. The main task is to provide the enterprise with fixed assets in the right quantity and quality composition and maintain them in working condition. This process solves the following tasks:
- Reimburses means of labor that are retired for various reasons . This is to prevent a reduction in production capacity.
- The mass of the used means of labor is increasing. This is how the prerequisites are created for the growth of the scale of activity of the enterprise and production.
- The clothing, age and technology component of fixed assets is improving. Their improvement is carried out in order to ensure further growth in production efficiency and increase its effectiveness.
The quantitative component of reproduction is reflected in their balance sheet, which is compiled by industry.
Using formulas
The reproduction of
fixed assets and their numerical characteristics are well displayed in the numerical version: = - + . What does this formula mean? It is decrypted as follows:
- FC - the value of fixed assets that were liquidated during the year;
- Fn - how much was in the beginning;
- Fl - the cost of disabled fixed assets;
- - monetary expression introduced during the year.
This is just the most general formula. For a more detailed study of the real state of affairs, various factors can be used, such as updating and liquidation of fixed assets, and also indicators of the equipment of the enterprise. Let's look at a couple of examples. To get started, pay attention to the update rate. It is expressed by the following formula: Ko = / . We have already considered the last two components, and Co is the update rate. It shows the share of fixed assets introduced in a given time period in the amount of their total monetary value at the end of the period under consideration. In addition to Co., we also consider the retirement rate. His formula: Q = Fl / Fn. Both factors considered can be expressed as a percentage. If Ko is larger than Qu, then this indicates that there is a process of improving fixed assets and expanding the scope of the enterprise.
Terminology
The reproduction of fixed assets of the enterprise is an interesting topic for entrepreneurs, as well as those who wish to take this path. But for a qualitative analysis of the topic, it is necessary to understand the essence of two terms: capital equipment and capital ratio. What do they mean? Under the first understand the average annual value of the created fixed assets, which is at the enterprise in relation to the whole subject or its component (for example, the workshop). If we talk about the agricultural production complex, then a figure of one hundred, for example, a hectare, can be taken.
The capital-labor ratio is understood as the average cost of fixed assets that operate at the enterprise with the expectation of one employee. Knowing the dynamics of these two indicators, we can conclude about the reproduction policy that is carried out in the company. It should be noted that it should be carried out at micro and macro levels. Thanks to this, you can get the best quantitative and qualitative effect.
How is this process going?
Conventionally, four forms of reproduction of fixed assets can be distinguished:
- Creature.
- Using.
- Depreciation.
- Recovery.
Creation most often takes place outside the enterprise. The only exception is the construction industry and engineering (this is especially true for instrumentation). At this stage, fixed assets are acquired and formed. If we consider a new enterprise, which is just being created, then the process includes the construction of structures and buildings, equipment is purchased, and the like. Use refers to use in order to obtain a product. Depreciation is the maintenance of working condition, and the recovery process refers to those fixed assets that can no longer fulfill their primary purpose.
And what about the existing enterprises?
They work in a different way. In general terms, it looks as follows:
- An inventory of all used and existing funds is being conducted. This is aimed at identifying worn and obsolete items.
- It is analyzed to what extent the existing equipment complies with advanced technological achievements, as well as the organization of production.
- The choice of the structure and volume of fixed assets. In this case, the specific production specifics and the planned volume of production creation are necessarily taken into account.
- After that, there is a process of reinstalling the working fixed assets, their acquisition, delivery and installation.
Simple reproduction
In this case, only the replacement of labor means that are already outdated, or their repair is carried out. This approach is rational in periods when there is a decline in production and enterprises massively cease operations. In these cases, reconstruction and technical re-equipment are preferable. It can be carried out as follows:
- Under the new project, existing structures, workshops and so on are expanded and rebuilt.
- Part of the capital investment in this case is directed to renew the active component of fixed assets (which are machines and equipment), but they will use old production buildings.
The option with technical re-equipment allows you to get a larger increase in production in quantitative terms with less material waste and in a relatively short time. Thanks to this, productivity and labor efficiency increase and production costs decrease. In addition, it is quite easy to find sources of reproduction of fixed assets for such an option, since you need to spend relatively little money.
Extended reproduction
This is a more desirable type for any entrepreneur. The expanded reproduction of fixed assets is the expansion of existing companies, new construction, equipment modernization, and the like. In such cases, enterprises begin their work, which, as a rule, meet all the requirements of progress. That is, the aim is to partially or completely eliminate the second form of obsolescence. The performance of equipment is increasing.
If we talk about equipment, then conditionally here we can distinguish several areas. Initially, it should be noted the improvement of existing machines, as a result of which their operational characteristics are increased and technical capabilities are improved. Mechanization and automation of machine tools also occurs, which allows to increase equipment productivity. Also, to minimize the need to attract a person, the transfer of equipment to the possibility of program control is widely used. When can we say that the modernization of equipment is cost-effective? If after its holding the annual volume of production increased, the cost of production decreased and labor productivity increased, then this means that it was not in vain. At the same time, the profitability of production increases.