The financial feasibility study, the importance of the financial feasibility study is that it helps the business owner or investor to determine all the financial needs for the establishment and operation of the project, and it also helps to determine the best available project financing sources, in addition to determining the cost of each source, which helps the project owner to choose the best sources This will have a positive impact on the capital of the project.
Financial Feasibility Study
Financial feasibility is one of the most important types of feasibility studies, as it helps the project owner to prepare estimates of cash inflows and outflows, which enables determining the commercial profit rate of the project.
Therefore, the financial feasibility study is one of the important pillars of the investment projects on which it is built, as it aims to reach the best ways to construct the project.
This is done by searching for the best rewarding material returns with appropriate economic costs. Therefore, the following elements should be followed, which can ensure the success of the financial study.
Where the elements of the financial feasibility study, like other types of studies, are divided into components and elements, which have goals and dimensions that are prepared to ensure success and achieve the highest possible profitability and consist of:
First, expenses are divided into three sections:
Incorporation expenses: which are paid only once, such as advertising and licensing fees.
Capital expenditures: These are spent at the beginning of the project, such as buildings and equipment.
Second, the operating expenses required for production are divided into:
First: fixed costs, which are costs that have nothing to do with the volume of production.
Second: variable costs, which are related to the volume of production. When demand and production increase, costs increase, and vice versa, costs decrease when production is lacking.
Revenues: These are the income generated by the project from selling products or services, and they are divided into two types:
Activity revenue: It is income that comes directly from the sale of the project’s products.
Revenues not related to the activity: It is revenue that is not related to the products provided by the project, but is related to the sale of a machine from the factory, or the sale of a car that was intended for the distribution of goods.
Financial feasibility study ready
Preparing a financial feasibility study for any project is a broad process that requires studying every aspect of it in a technical, financial and economic way, in order to ensure the success of its implementation with the actual steps and to avoid wasting time and effort without benefit.
And the feasibility study can be carried out by yourself and you must have sufficient information and experience to carry out such a task, so as not to suffer any losses now or in the future.
Or to use one of the companies specialized in carrying out feasibility studies, and one of the best companies that everyone praised for their professional performance and high efficiency.
Technical company for administrative and economic consultancy for major governmental and private institutions and factories, and various sectors such as the health and educational sector, in addition to the field of development and investment.
One of the best areas that the technology company has mastered is working in the field of completing adequate feasibility studies for various projects, as it studies all data and information related to the project in a detailed study.
In order to conduct effective feasibility studies, the project owner can reap the largest possible profit rate, and achieve the widest possible spread of the project. The company also provides the employer with alternative plans in case the project is exposed to danger or loss.
Financial feasibility study for a small project
It is a tabulation of the results obtained from other feasibility studies, as they are put in the form of certain tables and analyzes, so that the business owner can reach to show the costs and financial revenues that he bears in return for obtaining those benefits accruing to him from operating the project.
Considering that the profitability of any project depends mainly on the size and structure of investment spending, production revenues and costs, in addition to the timing of these elements.
We can summarize for you, dear business owner, the preparation of a financial feasibility study for any project, in several simple steps, including the following:
Preparing the estimated list of income and calculating cash flows in order to prepare and prepare that list, which must specify the following data in the form of numbers:
Revenue from the sale of products or services and when they are earned.
Management, production and marketing costs.
Assessment of the extent of the percentage of profit or loss, through the result of subtracting costs (production, management and marketing) from the revenues generated (from the sale of goods).
Evaluate what are the expectations for changing these numbers during the next five years.
Finally, the financial feasibility study of your project must answer these questions to assess its success when starting to implement it on the ground:
What is the amount of capital required to start, and is it available, or will you need an external loan?
What is the expected pricing policy for the product or service when it is launched in the market, and what is the expected sales volume.