What is a direct investment?

Direct investment allows one company or a wealthy individual to place money in another entity for reception or taxes. Large organizations or corporations are common users of a direct investment process. This process allows one company to obtain control of other entities and effectively helps investor companies to support its economic track. Two common ways to carry out these types of investment is to purchase a large block of shares or use a contractual agreement that allows the investor company to provide the other external capital. The first option allows a company or one large investor to buy shares in the company and reinvest dividends or capital profits from shares back to the invested company. This requires the use of an intermediary house so that the investor can make an initial purchase of shares. Poto that the company seller's shares simply invests dividends and shares separately. Dividends and shares can occur if shares are investedOtvosti extremely high. The result is less purchased other shares and lower overall investment. Therefore, this plan is not beneficial if the shares of the invested company are growing, which reduces the investor's ability to earn its investment.

Direct participation plans are not as common in a modern business environment, because these plans were mainly tax hids. However, changes in this investment plan reduce the benefits that the company receives in direct investment by becoming a partner in the cash and tax benefits of another company. In addition, these investment plans were more common in the real estate and energy industry. These limitations also reduce the benefits received from this investment plan.

Implementation of large direct investments in the company through any method can lead to the company to modify its financial reporting system. National Accounting Standards will dictate as to himThe strength of the investment company to report its investments in the financial statements. However, there are several basic standards. For example, investing less than 25 percent of ownership will most likely lead to investing as a share in its own capital. In between 26 and 50 percent, the Company can report an investment as a share in the management where an investment company can affect a second -company decision. Ownership bets exceeding 50 percent may result in relation to parents. This requires the parent company to report the financial information of the subsidiary of the only consolidated financial statements.