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Business planning. Making decisions on the need to invest in projects (business plans) based on performance indicators. Making decisions based on the results of the analysis in order to optimize income, costs (the most important)

Lecture notes, cheat sheets

Directory / Lecture notes, cheat sheets

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52. DECISION-MAKING ON THE NEED TO INVEST IN PROJECTS (BUSINESS PLANS) ON PERFORMANCE INDICATORS. DECISION-MAKING ON THE RESULTS OF THE ANALYSIS TO OPTIMIZE INCOME AND COSTS

Making a decision to invest in a project is a serious, deliberate step. It is necessary to take into account all the risks of the project in order to return the investment in the shortest possible time. To do this, you should conduct an investment analysis and analyze the main indicators: rdo, npv, iRr, pb, dpb, bi, etc. Also, in the case of investing resources in a new enterprise, it is necessary to have a clearly balanced strategic marketing plan and an understanding of the main shareholders. To assess the prospects for the development of the project, it is necessary to estimate its cost. Only this indicator is able to most fully reflect the prospects of the business. Having determined the value of the business in five years or more, you can compare investments with other more profitable financial instruments and projects and make a decision for yourself.

Optimization of income and costs is the primary task and the main function in the analysis, and then in the implementation of investment projects. Only with the rational use of funds is it possible to achieve a competitive advantage and take a leading position in the market. When making decisions, it is necessary to focus not only on indicators of financial and investment ratios, but also on a clear strategy for optimizing the costs of the enterprise and building incoming flows.

Considering various projects, it is difficult to determine the most profitable without carefully analyzing the cash flows of the project.

Choosing the most optimal business model, you must be guided by the following principles:

1. It is necessary to choose the project in which the economic profit is greater.

Economic Profit = Invested Capital x (ROIC - WACC)

where ROIC - return on invested capital; WACC is the weighted average cost of capital.

The return on invested capital should be greater than the cost of capital, otherwise the value of the company (business project) in the forecast period decreases in accordance with the rate of development (growth) of the company, which will lead to a loss of liquidity of the company in the market.

2. Comparing the NPV of the project, it is necessary to take into account other indicators, such as the payback period of the project and the return on investment.

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