☰ Contents · Basics of entrepreneurship

Investment and innovation

Lessons 26–27 · 2 lessons · U. G‘afurov, Q. Sharipov. Basics of Entrepreneurship: textbook for Grade 11 of general secondary schools and for secondary specialised and vocational institutions. 1st edition. “O‘zbekiston” publishing house, Tashkent, 2018
26

Investment activity

Textbook: pp. 120–123
GoalExplain investment, its types (real and financial) and sources, diversification, the investment project and its risk, and calculate a simple payback period.
New words
investment: money put into production in order to organise or expand it and earn income · Investitsiyareal investment: putting money into physical capital such as equipment or buildings · Real investitsiyadiversification: widening the types of products so the business adapts better to market changes · Diversifikatsiyapayback period: the time in which the income from a project repays the money invested · Qoplanish muddati
Explanation

Investment is money put in to organise or expand production. Real investment goes into physical capital such as buying equipment or renewing a building, while financial investment goes into securities. An entrepreneur may direct money into technical renewal, expansion of production or a new type of activity (diversification). The sources are internal (own funds, reserves, charter capital, depreciation charges) and external (credit, state budget funds, leasing, foreign investment). The chance that an investment does not bring the expected result is called investment risk; to lower it, an investment project is drawn up and analysed beforehand: data is chosen, processed and interpreted, and a conclusion is drawn. A simple indicator is the payback period: the invested sum divided by the extra profit per month or per year. The calculations in this section are learning exercises only and do not advise anyone to invest.

Worked examples
An imaginary bakery bought a new oven for 24 000 000 so‘m. Thanks to the oven, extra profit is 1 500 000 so‘m a month. Payback period = 24 000 000 / 1 500 000 = 16 months.
Diversification: an imaginary farmer used to grow only vegetables, and if the weather turned bad his income fell sharply. He added beekeeping to vegetables, so that if one line weakens, the other still brings income.
Class activity

Project analysis: a group invents and calculates the investment sum, monthly extra profit and payback period for an imaginary small project (for example a laundry service with new equipment), separates internal and external sources, and names one risk and a way to reduce it.

Practice
1
Write the difference between real and financial investment.
2
Name two internal and two external sources of investment.
3
The investment is 18 000 000 so‘m and monthly extra profit is 1 200 000 so‘m. How many months is the payback period?
4
A project of 30 000 000 so‘m gives 7 500 000 so‘m extra profit a year. How many years is the payback period?