Project appraisal is the process by which a financial institution makes an independent and objective assessment of the various aspects of the investment proposition for arriving at a financing decision. There are four broad aspects of appraisal: 1. Financial Feasibility 2. Technical Feasibility 3. Economic Feasibility 4. Management Competence. Aspect # 1. Financial Feasibility: The basic data required for a [...]
The below mentioned article provides a formula to calculate Internal Growth Rate (IGR) of a firm. IGR is the maximum growth rate a firm can achieve without going for external financing. All the financing requirements are met internally from the internal accruals. IGR can be expressed as follows: Where, ROA = Return on assets i.e. (PAT/Total assets) b = Retention [...]
The following article will guide you to learn about how to prepare a pessimistic and optimistic budget of a firm. In decision-making the first step is usually to make a single 'best estimate' for each item. The worst possible/best possible outcomes can be evaluated from the pessimistic and optimistic attitudes of the decisions made. An optimistic decision maker consider the [...]