Gross investment is the amount a company has invested in an asset or business without factoring in depreciation. Factoring in depreciation creates net investment. For example, a company buys a car for £3,250 that has depreciated by £1,950 after three years. In year three, the gross investment is £3,250 and the net investment is £1,300. This is important for tracking how much was actually used as an expenditure on the investment. Businesses also use this calculation for business formulas such as cash return on gross investment.
- Skill level:
Find the asset on the company's balance sheet. For example, the company has property valued at £325,000 on the balance sheet.
Find the accumulated depreciation on the company's balance sheet. In the example, the property has £130,000 of accumulated depreciation.
Add the accumulated depreciation to the company's book value of the asset to find the gross investment in the asset. In the example, £325,000 plus £130,000 equals a gross investment of £455,000.
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