INVESTMENT PROJECT APPRAISAL INDIVIDUAL TEST Question 1 List out the key factors considered for the success of investment project appraisal? There are 5 aspects for the success of investment project a.
INVESTMENT PROJECT APPRAISAL INDIVIDUAL TEST Question 1: List out the key factors considered for the success of investment project appraisal? There are aspects for the success of investment project appraisal - Market Appraisal: It is one of the major areas of introducing of any products in market In that case, must be considered this thing before launching in a market - Technical Appraisal: Determines whether the technical parameters are soundly conceived, realistic, and technically feasible Technical feasibility analysis is the systematic gathering and analysis of the data pertaining to the technical inputs required and formation of conclusion there from The availability of the raw materials, equipment, hard/software, power, sanitary and sewerage services, transportation facility, skilled manpower, engineering facilities, maintenance, local people etc., depending on the type of project are coming under technical analysis This feasibility analysis is very important since its significance lies in planning the exercises, documentation process, risk minimization process and to get approval - Economic Appraisal: Economic analysis of appraisal helps to justify the benefit of the project vs cost to produce the product How far the project contributes to the development of the sector, industrial development, social development, maximizing the growth of employment, etc are kept in view while evaluating the economic feasibility of the project - Ecological Appraisal: Impact of project on quality of: • • • • • Air Water Noise Vegetation Human life Major project such as these cause environment damage • • • Power plants Irrigation schemes Industries like leather processing, chemical Likely damage & the cost of restoration - Financial Appraisal: To determine whether the financial costs and returns are properly estimated and whether the project is financially viable Following minimum details are determined in the financial appraisal Question (3 points): What are the various methods of demand forecasting? How can we adapt those methods to specific project types? Methods of demand forecasting: Qualitative Methods: These methods rely essentially on the judgment of experts to translate qualitative information into quantitative estimates The important qualitative methods are: • Jury of executive method • Delphi method Time Series Projection Methods: These methods generate forecasts based on an analysis of the historical time series The important time series projection methods are: • Trend projection – method • Exponential smoothing method • Moving average method Causal Methods: More analytical than the preceding methods, causal methods seek to develop forecasts based on cause-effect relationships specified in an explicit, quantitative manner The important causal methods are: • Chain ratio method • Consumption level method • End use method • Leading indicator method • Econometric method How we adapt those methods: - Produce a model: Any forecast is primarily based totally upon a version, which may be orientated to the past, the present, and/or the destiny The version normally relates variables of the outside surroundings, and possibly the inner advertising variables, to the variable to be forecast - Test the model: A forecasting model must be tested where possible The model is probably tested towards trends in surroundings this is similar, however in a more advanced country approximately the industry of interest The outcome of opportunity forecasting techniques may be as compared to gaining more confidence in the forecast - Forecast independent variables: It is typically vital to forecast the independent variables, the ones upon which the state of the variable of interest (e.g., demand or sales) depend These forecasts may require the improvement and application of different models - Extrapolate: Any forecast is an extrapolation Even the "naïve" approach, in which records are largely unheeded, relies to some extent on experience The project is to be applied at a factor in time on the expectancy of destiny activities which might be necessary based upon thoughts of the way systems function, thoughts that cannot be completely separated from the past Question (4 points) What are the mistakes committed in financial analysis? * Using Generalized Financial Statements: If analysts take some time to read the finances, it's far likely that they digest them via a third-party provider The trouble with this approach is that each of those services modifies every company’s precise monetary statement to fit right into a pre-created template These services that to make sure comparison throughout companies, industries, and nations * Not Understanding the Reflexivity/Interactivity of the Three Major Financial Statements: Few analysts take some time to trace the dollar of capital raised within a company through the income statement to the lowest line and then back to the balance sheet again Nor they relate changes in the balance sheet accounts to the cash-flow statement to identify huge inconsistencies in either amounts or categorizations Instead, maximum analysts check out the statements in isolation from each other * Not Creating Apples-to-Apples Comparisons in Time: The income statement is stated quarterly for the first three quarters of the year and then annually, however, the balance sheet is always mentioned as a quarterly snapshot — even if it's for the fourth quarter Last, the coins flow statement is continually shown as an accretion of cumulative cash for the year Each of those is very different from each other and they only align in the first quarter for any company Consequently, analysts need to put all the financial statements on the same temporal dimension * Not Adjusting Statements for Distortions: This is a classic problem in financial statement analysis Despite this fact, most analysts not amend financial statements to adjust for one-time items, including write-offs, sales of divisions, accounting revisions, and so forth * Not Reading the Footnotes: Despite all the warnings to take note of the records contained in footnotes, most analysts not read them Nor most analysts take the numbers from the footnotes and put them into the main three bookkeeping financial statements ... advertising variables, to the variable to be forecast - Test the model: A forecasting model must be tested where possible The model is probably tested towards trends in surroundings this is similar,