D-@

Demand Ana|ys|s
uemand Analysls
W @e economlc slze of pro[ecL can be found ouL
by analysls of caplLal and operaLlng cosL as a
funcLlon of planL capaclLy
W Lconomlc planL capaclLy depend upon
W (a) markeL demand
W (b)@ecnologlcal slze of sLandard and avallable
equlpmenL
uemand Analysls
W MarkeL demand dlrecLly proporLlonal Lo
ouLpuL producL
W planL capaclLy can affecL Cver ouLpuL or under
ouLpuL
W CapaclLy plannlng ls Lo lnLegraLe Le facLor of
producLlon Lo mlnlmlze producLlon cosL
W lor capaclLy plannlng demand analysls ls
needful
MeLods for demand analysls
W MaLerlal balance and ouLpuL meLod
W 8eneflL cosL analysls
W ulscounLed cas flow meLod
W nLernal raLe of reLurn meLod
W -eL presenL value meLod
MaLerlal balance and ouLpuL meLod
W locus on converslon of lnpuL maLerlal lnLo
ouLpuL le demands are Lransferred lnLo
useful producL MaLerlals are converLed lnLo
producL wlL elp of maclne
W @e proflL depends upon relaLlonslp beLween
revenue varlable and flxed cosL
MaLerlal balance and ouLpuL meLod
8eneflL cosL analysls
W CosL are cas ouLflow and beneflLs are cas
lnflows
W @e payback perlod ls cas ouLlays on Le
pro[ecL Lo be recovered ls a lengL of Llme
W ayback perlod (orlglnal cosL of
lnvesLmenL/Annual cas lnflows)
W MeLod focus on llquldlLy Lan proflLablllLy
Cas flow
W ash f|ow ls Le movemenL of cas lnLo or ouL of a
buslness pro[ecL or flnanclal producL (-oLe LaL cas ls
used ere ln Le broader sense of Le Lerm were lL
lncludes bank deposlLs)
W L ls usually measured durlng a speclfled flnlLe perlod of
Llme
W MeasuremenL of cas flow can be used for calculaLlng
oLer parameLers LaL glve lnformaLlon on a companys
value and slLuaLlon
W @o deLermlne a pro[ecLs raLe of reLurn or value @e Llme of
cas flows lnLo and ouL of pro[ecLs are used as lnpuLs ln
flnanclal models suc as lnLernal raLe of reLurn and neL
presenL value
Cas flow
W Cas flow can eg be used for calculaLlng
parameLers
W Lo deLermlne a pro[ecLs ate of etun or value
@e Llme of cas flows lnLo and ouL of pro[ecLs
are used as lnpuLs ln flnanclal models suc
as |ntena| ate of etun and net pesent va|ue
W Lo deLermlne problems wlL a
buslnesss ||qu|d|ty 8elng proflLable does noL
necessarlly mean belng llquld A company can fall
because of a sorLage of cas even wlle
proflLable
||qu|d|ty
W L|qu|d|ty ls a measure of Le ablllLy of
a debLor Lo pay ls debLs as and wen Ley fall
due L ls usually expressed as a raLlo or
a percenLage of currenL llablllLles
@, VALU CI ,CN
W @e noLlon LaL money as Llme value ls one
of Le mosL baslc concepLs of lnvesLmenL
analysls lor any producLlve asseL lL's value
wlll depend upon Le fuLure cas flows
assoclaLed wlL LaL parLlcular asseL
W 8s100 recelved afLer one year would noL be
Le same as 8s100 recelved afLer Lwo years
W ompound|ng
@ranslaLlng Le currenL value of money lnLo
lLs equlvalenL fuLure value ls referred Lo as
compoundlng
W D|scount|ng
@ranslaLlng a fuLure cas flow or value lnLo
lLs equlvalenL value ln a prlor perlod ls
referred Lo as dlscounLlng
ulscounLed cas flow meLod