The Effect of Ownership Relations On Operating Surplus in UNSNA
The size of total operating surplus is in theory not affected by whether the assets used in production are owned or rented by the enterprise, or whether assets owned by the enterprise and used in production are financed out of its own funds (or equity capital) or out of borrowed funds (or loan capital).
But if buildings, other structures, machinery or equipment are rented by an enterprise, the payments of rentals under an operating lease or similar lease are recorded as purchases of services (Intermediate consumption). Thus, the payment of a rental on a fixed asset reduces its gross value added, below what it would be, if the producer owned the asset.
The impact of this on net value added is offset to some extent by the fact that a tenant, or lessee, incurs no asset depreciation, whereas an owner would. But net value added will be lower when a fixed asset is rented, because the rental has to cover the lessor's operating and interest costs as well as asset depreciation. Thus, the size of net operating surplus will vary according to whether fixed assets are rented, or purchased.
Enterprises may furthermore invest surplus capital in financial assets or real estate assets, especially in times of uncertainty or high interest rates. Considerable property income may be received from such investments. In UNSNA, this property income does not constitute part of value added in production, and is therefore excluded from operating surplus (except for what is called the services of the financial, insurance and real estate industry).
If therefore an increasing amount of business income consists of property income rather than income from production, this will lower value added, and lower operating surplus.
Read more about this topic: Operating Surplus
Famous quotes containing the words effect, ownership, relations, operating and/or surplus:
“The effect of liberty to individuals is that they may do what they please: we ought to see what it will please them to do, before we risk congratulations.”
—Edmund Burke (1729–1797)
“They had their fortunes to make, everything to gain and nothing to lose. They were schooled in and anxious for debates; forcible in argument; reckless and brilliant. For them it was but a short and natural step from swaying juries in courtroom battles over the ownership of land to swaying constituents in contests for office. For the lawyer, oratory was the escalator that could lift a political candidate to higher ground.”
—Federal Writers’ Project Of The Wor, U.S. public relief program (1935-1943)
“What a man sows, that shall he and his relations reap.”
—Clarissa Graves (1892–1985?)
“Many people operate under the assumption that since parenting is a natural adult function, we should instinctively know how to do it—and do it well. The truth is, effective parenting requires study and practice like any other skilled profession. Who would even consider turning an untrained surgeon loose in an operating room? Yet we “operate” on our children every day.”
—Louise Hart (20th century)
“Next week Reagan will probably announce that American scientists have discovered that the entire U.S. agricultural surplus can be compacted into a giant tomato one thousand miles across, which will be suspended above the Kremlin from a cluster of U.S. satellites flying in geosynchronous orbit. At the first sign of trouble the satellites will drop the tomato on the Kremlin, drowning the fractious Muscovites in ketchup.”
—Alexander Cockburn (b. 1941)