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UNIT 11. FEASIBILITY STUDIES
Once you have a firm grasp of financial statements and how to analyse them in terms of profitability, liquidity and security, you are well set up to cope with feasibility studies.
Now there are many kinds of feasibilities, eg. environmental feasibility, community feasibilities, cost feasibilities, etc. From a financial management point of view we are concerned about the financial viability of a project or idea.
All we have to keep in mind is that the feasibility study is just like a budget and that we have to end up with a Budgeted Profit & Loss Statement and Budgeted Funds Statement together with the associated budgeted ratios.
The following chart sets out the usual components in the feasibility study for project evaluation purposes.
PROJECT EVALUATION
Project Definition
Consumer/Customer Needs
Project Definition (eg. Design Brief)
Income Analysis
Sales Volume/Value & Price Estimates
Supporting Logic eg. Industry Trends, Marketing plan (target market, product/price strategy etc.)
Period of Income
Cost Analysis
Variable & Fixed Costs
Basis of Cost Estimates
Logic
Standards
Targets
Equipment & Processes
Productivity
Funds Analysis
Working Capital Needs (eg. Stock & Debtors)
Equipment Needs
Profit Analysis
Contribution
Break-even Point
Net Profit
Pay Back
ROI
(Discounted Cash Flow)
Copyright © Bill Wright 1994