FINANCIAL APPRAISAL

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Course Title: International Marketing Logistics
Assignment Code: IBO-06/TMA/2019-20
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IBO – 06 International Business Finance Solved Assignment for 2019-20

Q3.) (b.) ‘Financial appraisal is the key most appraisal of any project’, Explain and also discuss its relationship with other appraisals namely technical, market, economic and social.

Ans: Financial appraisal is a method used to evaluate the viability of a proposed project by assessing the value of net cash flows that result from its implementation. A financial appraisal essentially views investment decisions from the perspective of the organization undertaking the investment. 

A financial analysis of a project is undertaken to assess whether it will be commercially profitable for the enterprise implementing it. A private firm will undertake a financial analysis of a potential investment in order to determine its impact on the firm's balance sheet.

Economic appraisal and a financial appraisal are effective tools that have application at every stage of Total Asset Management. They can be used for assessing the integrity of capital investment decisions and the effective and efficient management of existing physical assets.

> Financial appraisal reviews the purely financial aspects of a product or project;

> Economic appraisal reviews the financial and other factors that affect the economic aspects of a product or project;

> Areas where economic appraisal and financial appraisal techniques should be used;

> Assessment of new or replacement capital expenditure, or major maintenance;

> Assessment of appropriateness of design, operating, or other standards.

TECHNICAL APPRAISAL: Technical feasibility analysis is the systematic gathering and analysis of the data pertaining to the technical inputs required and the formation of conclusions therefrom. The availability of the raw materials, power, sanitary and sewerage services, transportation facility, skilled manpower, local people, etc, are coming under technical analysis. This feasibility analysis is very important since its significance lies in planning the exercises, documentation process, and risk minimization process and to get approval.

SOCIO-ECONOMIC APPRAISAL: 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.

MARKET/COMMERCIAL APPRAISAL: The scope of the project in market or the beneficiaries, customer-friendly process and preferences, future demand of the supply, effectiveness of the selling arrangement, the latest information available in all areas, government control measures, etc. The appraisal involves the assessment of the current market scenario, which enables the project to get adequate demand. Estimation, distribution, and advertisement scenarios also to be considered.