financial analysis, Profitability Analysis, Social cost benefit analysis, preparation of budget cash flow

GROUP NUMBER 4
POOJA PARDESHI
SANDHYA SAHU DHARNA SHARMA

MAMTA TIWARI
SAGAR VAGAL

52 64 74 83 86

Project management
A project is a collection of activities that are inter

related with a specific over all purpose A project isn't something that's part of normal business operations. It's typically created once, it's temporary, and it's specific. As one expert notes, "It has a beginning and an end." A project consumes resources (whether people, cash, materials, or time), and it has funding limits.

Financial analysis
Comparing the costs and benefits over time to determine

whether a project is profitable or not. One of the most common ways of analyzing financial data is to calculate ratios from the data to compare against those of other companies or against the company's own historical performance. For example, return on assets is a common ratio used to determine how efficient a company is at using its assets and as a measure of profitability. This ratio could be calculated for several similar companies and compared as part of a larger analysis.

Assess the Financial Indicators

Net Present Value (NPV) Internal Rate of Return (IRR) Sensitivity Analysis

NET PRESENT VALUE

The difference between the present value of cash

inflow and the present value of the cash outflow. NPV is using in capital budgeting to analysis the profitability of the project. It generally steadily decreases, as the value if initial outlay increases. It consider the time value of money and also the project entire life of assessment. Higher the NPV indicates better the project.

Internal rate of return

It is defined as the discount rate at which an investment

has a zero net present value.

The internal rate of return equates to the interest rate,

expressed as a percentage, that would yield the same return if the funds had been invested over the same period of time.
Therefore, if the internal rate of return for the project is

less than the current bank interest rate it would be more profitable to put the money in the bank than execute the project

Sensitivity Analysis
Projects do not always run to plan. Costs and benefits

estimated at an early stage of a project may indicate a profitable project, but this profit could be eroded by an increase in costs or a decrease in the value of the benefits (the revenue).
Sensitivity analysis provides a means of determining the

financial impact of this type of fluctuation.

By entering an anticipated percentage increase in costs

or decrease in revenue the financial impact on the project can be identified by looking at the change to the NPV or IRR measures.

Financial analysts often assess the firm's

Profitability -Its ability to earn income and sustain growth

in both short-term and long-term.

2. Solvency - Its ability to pay its obligation to creditors

and other third parties in the long-term.

3. Liquidity - Its ability to maintain positive cash flow, while satisfying immediate obligations;
4. Stability- The firm's ability to remain in business in the

long run, without having to sustain significant losses in the conduct of its business.

Financial analysis is required for many financial management decisions

How to manage the finances to achieve the strategic

goals of the institution How to reach self-sufficiency/breakeven point How to increase efficiency especially reducing the cost per client What is the optimum level of each different operational expense including the cost of funds How to manage the costs of human resources as part of overall human resource management How much capital do you need?

PROFITABITY ANALYSIS
Profitability analysis involves examining the relationships

between revenues, costs, and profits. Performing profitability analysis requires an understanding of selling prices and the behavior of activity cost drivers. (Activity cost driver is often referred to as cost driver when the context is clear that we are discussing activity, rather than structural or organizational, cost drivers.) Profitability analysis is widely used in the economic evaluation of existing or proposed products or services.

Cont..
Typically, it is performed before decisions are finalized in

the operating budget for a future period.

With CVP analysis, volume refers to a single unit-level

activity cost driver, such as unit sales, that is assumed to correlate with changes in revenues, costs, and profits. Cost-volume-profit analysis is useful in the early stages of planning because it provides an easily understood framework for discussing planning issues and organizing relevant data. CVP analysis is widely used by for-profit as well as not-forprofit organizations. It is equally applicable to service, merchandising, and manufacturing firms.

 The traditional approach to profitability analysis,

which considers only unit-level activity cost drivers, is identified as cost-volume-profit (CVP) analysis. It is a technique used to examine the relationships among the total volume of an independent variable, total costs, total revenues, and profits for a time period (typically a quarter or year). With CVP analysis, volume refers to a single unit-level activity cost driver, such as unit sales, that is assumed to correlate with changes in revenues, costs, and profits.

 Cost-volume-profit analysis is useful in the early stages

of planning because it provides an easily understood framework for discussing planning issues and organizing relevant data. CVP analysis is widely used by for-profit as well as notfor-profit organizations. It is equally applicable to service, merchandising, and manufacturing firms.

Social Cost Benefit Analysis

As an aid to planning, decision- making, evaluation

and control, the social cost pro vides a scientific and quantitative analysis for the appraisal of projects with a view base to determine whether the total benefits of a project justify the total social costs.
To make a scientific and systematic social cost benefit

analysis of a projects, it is cost benefit analysis of a projects, it is necessary to weigh each each projects advantages (benefits) and disadvantages (costs) to the society or nation as whole.

Social Cost

Various social costs include mainly the following items: (i)Goods and Material Acquired (ii)Labor and Services Used: Work-related injuries and illness Occupational disease Social losses resulting from employment of children, women and young persons. Fixed Assets Purchased Environmental Damage Public Service and Facilities Used Discrimination Payments from Other Elements of Society

Social benefit
A project has many social benefits. These Benefits may

be listed as follows: (i)Products and Services Provided (ii)Payments to the Other Elements of Society (iii)Creation of Employment Opportunities (iv)Additional Direct Employee Benefits (v)Improvements in Environment (vi)Staff, Equipment and Facility Donated (vii)Other benefits

 Providing employment opportunities in those areas

where unemployment or under employment is prevalent. Creation of employment opportunities to weaker sections of the society e.g., schedule castes, scheduled tribes etc. on a preferential basis. Postponing opportunities for the preservation of precious natural resources.

Rational of social cost benefit analysis

SCBA brings out a comparison between the social benefits

and social costs in order to reveal the net return on investment as a difference quantified. For example: incase of building a highway, the effect on the environment to local residents by causing nuisance, would be a social cost; but the traveling a motor vehicle would be easier through highway, and will represent social benefit. In effect, investment decisions would be based largely on economic costs and benefits, but in the SCBA, items of social costs and benefits would be added in financial arithmetic. These items of social costs and benefits may include the following:

Objectives
Economic benefit of the project in terms of the

Shadow price The impact of project on level of savings and investment in the society The impact of project on the distribution of income in the society The contribution of the towards the fulfillment of certain merit wants

Preparing a cash-flow budget

Helps to understand and plan for likely peaks and

troughs in your cash flow Gives you important benchmarks/indicators of what you want to achieve Allows you to make informed decisions when planning additional expenditure Shows your bank youre managing your cash flow, and whether you can afford additional borrowings

Cash Flow Budget

There are various factors to consider when preparing

your cash-flow budget, including the time period. This depends on the size of your business, but its common to prepare a 12-month cash-flow budget. When youre starting up, consider preparing a 90-day cash flow budget.

Benefits
Predict the ability of your business to create the cash

necessary for expansion or to support you Project your business's cash inflows and outflows and predict your business's cash flow gaps periods when cash outflows exceed cash inflows Be used to prepare a formal cash flow budget for your lender to help assure the lender that you will have the cash available to pay back the loan