FINANCIAL STUDY

MARIA AGNES O. DIAZ

 FINANCIAL STUDY

 Financial study should show in specific terms

whether the project will be profitable even with
existing competition and in unfavourable
economic conditions. Detailed figures showing
the improvement of the project’s financial
condition over time should be presented.
 The financial study of the project may be broken
down into the following major sections:

1. Major assumption
2. Total project cost
3. Initial working capital requirements
4. Alternative source of financial the project
5. Beginning and pro-forma financial statemer.
6. Preparation of financial statements
 Financial position/balance sheet
 Performance/ Income statement
 Cash flow statement
 MAJOR ASSUMPTIONS

 Assumptions play an important role because

they serve as the foundation for estimating the
future expenditures expenses, and revenues of
the project as accurately as possible. These
assumption must be based on well-considered,
realistic, and workable facts.
 TOTAL PROJECT COST
 The second step in the presentation of the financial
aspect of a project feasibility study is an estimation
of the project’s total cost or initial asset or capital
requirements.
 Based on the materials, supplies, equipment,
physical plant, and manpower needs of the project
specified in the technical study, the total project
specified in the technical study, the total project
cost is composed of current asset levels and
planned fixed asset acquisitions.
 INITIAL WORKING CAPITAL
REQUIREMENTS
 Amount of financial resources
needed to cover the cost of the
production cycle, upcoming
operational expenses and the
repayments of debts.
 ALTERNATIVE SOURCE OF
FINANCIAL THE PROJECT COST
 Are those channels of financial
that have emerged outside of
the traditional finance system
like the regulated banks and
capital markets.
 Beginning and pro-forma financial
statemer
 A pro forma financial
statement are defined as
financial as financial
statements forecasted for
future periods.
 Preparation of financial statements

 Financial statements presentation an

orderly and understandable form the
financial condition of a business
enterprise, its operating
performance, as well as the status of
its liquidity.
 THE INCOME STATEMENT

 Is a summary of the project’s total

revenues and total costs for one period of
fiscal year, thereby arriving at the net
income or loss for the period. In Exhibit
2-1, a model format for income statement
preparation is presented.
 THE CASH FLOWS
STATEMENT OR THE “CASH
BUDGET”
 Is
a presentation of cash
receipts and disbursements
for a given operating
period or fiscal year.
 THE BALANCE SHEET

 Reflects the assets acquired

by the project and the
corresponding liabilities it
incurred and the owners’
equity as of specific date.