The study analyzes the nature of the modernization of the enterprise, identifies the factors that determine the need for its implementation in relation to Russian industrial enterprises, which were forced to miss several cycles of renewal as a result of the national economy reformation. It is necessary to comprehensively transform their material and technical bases to produce innovative, competitive products in the face of global uncertainties and increased competition on the target markets. The purpose of the study is to prove that the modernization of industrial enterprises is based on the transformation of their material and technical base, regular updating of fixed assets in order to eliminate their moral depreciation and the successful implementation of digital transformation. As a result, the study of the processes and algorithms for justifying the renewal and modernization of the formation of funds at the expense of internal sources of the enterprise investments. An approach to the assessment of their capabilities and importance to ensure the financing of modernization projects is proposed. Methods of statistical and comparative analysis, quantitative and qualitative analysis of economic phenomena and management of industrial enterprises were used to solve the set tasks. The characteristics of changes in profit, return on fixed assets and depreciation as sources of investments, depending on the dynamics of interest rates and inflation, are determined. The directions of increasing the importance of internal sources of enterprise investments for the implementation of its modernization projects are proposed. Key conclusions: it is necessary to build a comprehensive mechanism for managing the depreciation process of enterprises as its reproduction and modernization core. It is also necessary to ensure the targeted use of depreciation and the minimum return on funds accumulated by owners in the depreciation fund.