Reproduction of fixed assets of the enterprise

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

What does the process of reproduction of fixed assets imply? What is its significance in today's world? How is the reproduction of fixed assets carried out? These and a number of other issues will be discussed in this article.

General information

In market conditions, the policy pursued regarding the reproduction of fixed assets is 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 expanded 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 acquisitions, renovations, upgrades, overhauls and retoolings. The main task is to provide the enterprise with fixed assets in the required quantitative and qualitative composition and maintain them inworking condition. This process accomplishes the following tasks:

1. Compensates for the means of labor retired for various reasons. This is done to prevent a decrease in production capacity.
2. The mass of used means of labor is increasing. This is how the prerequisites are created for the growth of the scale of the enterprise and production.
3. The clothing, age and technological 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.

Use formulas

Reproduction of fixed production assets and their numerical characteristics are well displayed in the numerical version: Fc=Fn - Fl + Fv. What does this formula mean? It is decoded as follows:

• FC - the value of fixed assets that were liquidated during the year;
• Fn - how much was at the beginning;
• Fl - the cost of disabled fixed assets;
• Fv is the monetary value of inputs throughout the year.

This is just the most general formula. For a more detailed study of the real state of affairs, various coefficients can be used, such as the renewal and liquidation of fixed assets, as well as indicators of the equipment of the enterprise. Let's look at a couple of examples. Let's start with the coefficientupdates. It is expressed by the following formula: Ko \u003d Fv / Fk. We have already considered the last two components, and Ko is the update factor. 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 review. In addition to Ko, let's also consider the dropout rate. Its formula: Kv \u003d Fl / Fn. Both considered coefficients can be expressed as a percentage. If Ko is greater than Kv, then this indicates that there is a process of improving fixed assets and expanding the scale of the enterprise.

Terminology

Reproduction of fixed assets of an enterprise is an interesting topic for entrepreneurs, as well as those who wish to embark on this path. But for a qualitative analysis of the topic, it is necessary to understand the essence of two terms: capital equipment and capital-labor ratio. What do they mean? The first is understood as the average annual cost of the created fixed assets, which is in the enterprise in relation to the entire subject or its component (for example, a workshop). If we talk about the agricultural production complex, then we can take an indicator per hundred, for example, a hectare.

Under capital-labor ratio understand 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 draw a conclusion about the reproductive policy pursued by the company. It should be noted that it should be carried out at the micro and macro levels. Thanks to this, it is possibleget the best quantitative and qualitative effect.

How does this process happen?

It is conditionally possible to distinguish four forms of reproduction of fixed assets:

1. Creation.
2. Use.
3. Depreciation.
4. Recovery.

Creation most often occurs outside the enterprise. The only exception is the construction industry and mechanical engineering (this is especially true for instrumentation). At this stage, fixed assets are acquired and formed. If we consider a new enterprise that is just being created, then the process includes the construction of structures and buildings, the purchase of equipment and the like. Use refers to use in order to obtain a product. Depreciation is maintenance, and the recovery process refers to those fixed assets that can no longer fulfill their primary purpose.

What about existing businesses?

They work differently. In general terms, it looks like this:

1. Inventory of all used and existing funds. This is aimed at identifying worn and obsolete items.
2. It analyzes how the existing equipment corresponds to the advanced achievements in terms of technology, as well as the organization of production.
3. The choice of the structure and volume of fixed assets is carried out. At the same time, it is imperativethe specific specifics of production and the planned volume of product creation are taken into account.
4. After that, there is a process of reinstallation of working fixed assets, their acquisition, delivery and installation.

Simple reproduction

In this case, only the replacement of tools 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 stop doing business. In these cases, reconstruction and technical re-equipment are more preferable. Can be done as follows:

1. According to the new project, existing facilities, workshops and so on are being expanded and rebuilt.
2. Part of capital investments in this case is directed to renovate the active component of fixed assets (which are machinery and equipment), but at the same time old production buildings will be used.

The variant with technical re-equipment allows you to get a greater increase in production in quantitative terms with less material costs and in a relatively short time. This increases the productivity and efficiency of labor and reduces the cost of production. In addition, it is quite easy to find sources of reproduction of fixed assets for this option, since relatively little money needs to be spent.

Extended reproduction

This is the more desirable type for anyoneentrepreneur. Expanded reproduction of fixed assets is the expansion of existing companies, new construction, equipment upgrades, and the like. In such cases, enterprises begin their work, which, as a rule, meet all the requirements of progress. That is, the goal is to partially or completely eliminate the second form of obsolescence. At the same time, equipment performance increases.

If we talk about equipment, then conditionally there are several areas. Initially, it should be noted the improvement of existing machines, as a result of which their operating characteristics are increased and technical capabilities are improved. Also, mechanization and automation of machine tools takes place, which allows increasing the productivity of equipment. Also, to minimize the need to involve 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 implementation, the annual volume of production increased, the cost of production decreased and labor productivity increased, then this means that it was not carried out in vain. At the same time, the profitability of production also increases.