How to Calculate Gross Investment

by Carter McBride; Updated September 26, 2017
...

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 $5,000 that has depreciated by $3,000 after three years. In year three, the gross investment is $5,000 and the net investment is $2,000. 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.

Step 1

Find the asset on the company's balance sheet. For example, the company has property valued at $500,000 on the balance sheet.

Step 2

Find the accumulated depreciation on the company's balance sheet. In the example, the property has $200,000 of accumulated depreciation.

Step 3

Add the accumulated depreciation to the company's book value of the asset to find the gross investment in the asset. In the example, $500,000 plus $200,000 equals a gross investment of $700,000.

About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

Photo Credits

  • balance sheet image by Darko Draskovic from Fotolia.com