The economic feasibility study is one of the branches of the feasibility study, as the feasibility study includes three main branches, which are a market, technical, financial, and economic feasibility study. This is our discussion in this article, the financial and economic feasibility study.
What is an economic and financial feasibility study?
The financial and economic feasibility study is the one that takes care of all financial matters of the project, as it is concerned with all capital costs and all costs of the production and operation process and all expected sales and thus calculates the percentage of profits and the extent of the project’s profitability or not.
The importance of feasibility
It is not possible in any way to conduct a financial and economic study unless two studies have been done before it, which is the market study, which determines the ratio of supply and demand in order to determine the productive strength of the project and then determine the percentage of sales and the price of the product is determined based on the market study and the technical study where the costs of fixed assets Buildings, machinery, production costs, and others are based on the technical study and therefore the profit percentage is calculated so that the decision is taken by the project owner to implement or cancel the project, and the financial and economic study is concerned after ovulation in the capital used as it works to preserve the capital of the project. It is considered a reference for the business owner that can be resorted to in the event of financial and economic crises for the project.
The most important points in the financial study
Investment costs, which are those costs that start with the inception of the project until the start of the operation, which are the costs of fixed assets.
Current costs, which are all costs related to the operation or production process, for example, wages of workers and employees, innovations, purchase of raw materials, etc.
Funding sources, which are sources of capital for the owner of the project, and loans from banks are considered sources of capital, and revenues for the project, along with the life of the project and gaining benefits are considered sources of financing.
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The economic feasibility
the cycle is considered one of the most important studies in the feasibility study due to its importance to the project owner, so the economic feasibility study is considered a cycle that must complete several stages, in which one stage cannot be dispensed with, to be a complete integrated study. Watch here