Gross and Net Capital Formation
In economic statistics and accounts, capital formation can be valued gross, i.e., before deduction of consumption of fixed capital (or "depreciation"), or net, i.e., after deduction of "depreciation" write-offs.
- The gross valuation method views "depreciation" as a portion of the new income or wealth earned or created by the enterprise, and hence as part of the formation of new capital by the enterprise.
- The net valuation method views "depreciation" as the compensation for the cost of replacing fixed equipment used up or worn out, which must be deducted from the total investment volume to obtain a measure of the "real" value of investments; the depreciation write-off compensates and cancels out the loss in capital value of assets used due to wear & tear, obsolescence, etc.
Read more about this topic: Capital Formation
Famous quotes containing the words gross and, gross, net, capital and/or formation:
“I am haunted by interrupted acts,
introspective as a leper, enchanted
by a repulsive clew,
a gross and fugitive movement of the limbs.
Is this the love that shook the lights to flame?”
—Muriel Rukeyser (1913–1980)
“I am haunted by interrupted acts,
introspective as a leper, enchanted
by a repulsive clew,
a gross and fugitive movement of the limbs.
Is this the love that shook the lights to flame?”
—Muriel Rukeyser (1913–1980)
“There is a potential 4-6 percentage point net gain for the President [George Bush] by replacing Dan Quayle on the ticket with someone of neutral stature.”
—Mary Matalin, U.S. Republican political advisor, author, and James Carville b. 1946, U.S. Democratic political advisor, author. All’s Fair: Love, War, and Running for President, p. 205, Random House (1994)
“There exists, between people in love, a kind of capital held by each. This is not just a stock of affects or pleasure, but also the possibility of playing double or quits with the share you hold in the other’s heart.”
—Jean Baudrillard (b. 1929)
“It is because the body is a machine that education is possible. Education is the formation of habits, a superinducing of an artificial organisation upon the natural organisation of the body.”
—Thomas Henry Huxley (1825–1895)