Investments. The concept and principles of assessing the effectiveness of an investment project (the most important)

Lecture notes, cheat sheets
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Investments. The concept and principles of assessing the effectiveness of an investment project (the most important)

Lecture notes, cheat sheets

Directory / Lecture notes, cheat sheets

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THE CONCEPT AND PRINCIPLES OF ASSESSING THE EFFICIENCY OF THE INVESTMENT PROJECT

Investment project efficiency reflects the compliance of the project with the goals and interests of its participants. The following types of performance need to be evaluated:

1) the effectiveness of the project as a whole (includes the public (socio-economic) and commercial (financial) effectiveness of the project);

2) the effectiveness of participation in the project (determined in order to verify the feasibility of the investment project and the interest in it of all its participants).

Basic principles for evaluating the effectiveness of investment projects:

1) consideration and analysis of the project from conducting pre-investment studies to the termination of the project;

2) cash flow modeling;

3) comparability of the conditions for comparing various projects for a qualitative choice of alternative investment decisions;

4) positivity and maximum effect.

For an investor, an investment project will be effective if the effect of its implementation is positive;

5) taking into account the time factor;

6) accounting for future costs and receipts;

7) taking into account all the most significant consequences of the project;

8) taking into account the presence of different project participants, the discrepancy between their interests;

9) taking into account the impact on the efficiency of the investment project of the need for working capital (its growth) necessary for the functioning of the production assets created during the implementation of the project, and their expanded reproduction;

10) assessment of the impact of inflation, the possibility of using several currencies in the implementation of the project;

11) taking into account the impact of uncertainties and risks in the implementation of the investment project.

The main indicators used to calculate the effectiveness of an investment project, are:

▪ commercial (financial) efficiency, showing the financial results of the investment project;

▪ budgetary efficiency, reflecting the financial consequences of the project for budgets of various levels and extra-budgetary funds;

▪ economic efficiency, taking into account the ratio of costs and results of an investment project;

▪ social efficiency, reflecting the social consequences of the implementation of an investment project;

▪ environmental efficiency, characterizing the environmental consequences of the implementation of an investment project.

Author: Kuznetsova S.A.

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