Project Identification

PROJECT CLASSIFICATION, IDENTIFICATION

& PROCESS

MEANING OF PROJECT

Project is also known as Capital Investment or Capital Expenditure or Capital Project.

Capital Expenditure, from accounting point of view is an expenditure which is shown as an asset in the balance sheet.

This asset, except in case of non depreciable asset like land is depreciated over its life.

SITUATIONS INVOLVING CAPITAL EXPENDITURE DECISIONS

Insurance Company planning to install a computer system for information processing.

A graduate student planning to buy a bike.

IMPORTANCE OF CAPITAL EXPENDITURE

Long term Effect

Irreversibility

Substantial Outlay

DIFFICULTIES IN CAPITAL EXPENDITURE

Measurement Problem

Uncertainty

Temporal Spread

CLASSIFICATION OF PROJECT or CAPITAL INVESTMENT

Physical Asset Monetary Asset Intangible Asset Strategic Investment Tactical Investment Mandatory Investment Replacement Investment Expansion Investment Diversification Investment R&D Investment

PROJECT IDENTIFICATION

For establishing a successful venture, the search for promising project idea is the first step.

Key to success lies in getting into right business at right time.

For identifying opportunities in business, it requires:

1) Imaginative2) Sensitivity3) Environment Changes4) Realistic Assessment

FEASIBILITY STUDY FOR PROJECT IDENTIFICATION

Generation of Ideas Initial Screening Is the Idea Promising? If Yes, plan feasibility analysis and If No, Terminate it. Conduct Market Analysis Conduct Technical Analysis Conduct Financial Analysis Conduct Economic & Ecological Analysis Is Project Worthwhile? If Yes, prepare funding proposal and If No, Terminate it.

PROCESS INVOLVED IN PROJECT IDENTIFICATION

Generation of Ideas: Ideas with the help of which product or services

made have better quality and low price.

Monitoring the business environment: 1) Economic Sector2) Government Sector3) Technological Sector4) Competition Sector5) Supplier Sector

Cont…

Corporate Appraisal: Corporate strengths & weaknesses are essential for

identifying investment opportunity which can be profitable.

Profit Potential of Industries / Michael Porter Model:1) Rivalry among existing firm2) Threat of new entrants3) Threat of substitute products4) Bargaining power of buyers5) Bargaining power of suppliers

Cont…

Scouting for Project Ideas : Project ideas are key to success. So proper analysis,

examine, review, investigation of industry should be done.

Trade fairs can also be attended to get new ideas.

Preliminary Screening : It involves1) Availability of inputs2) Adequacy of market 3) Cost4) Risk level5) Government policies

Cont…

Project Rating Index :

All the proposals are given rating on rating scale.

Selection of best appropriate project :

Project that gets the highest rank is selected.

I AM NOT EXPECTING ANY QUERY !!!!!!!!!

Thank You