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Financial Study

In: Business and Management

Submitted By debz143
Words 1465
Pages 6
Financial Study

As earlier cited, the financial study quantifies and expresses in peso terms, the results of the other aspects like marketing, technical, legal, tax, among others. This study is done to determine and evaluate the project’s capital requirements, possible sources of financing including the terms and conditions, forecasts of operating revenues, costs and expenses, and effect of inflation on the financial situation and results of operations. In general, there is no specific rule as to the period coverage of the financial study. The period of time to be covered depends on the requirements of the study.

Steps in Financial Study

Conducting the financial study involves the following steps:

a. Determine the specific financing requirements of the project with respect to types and cost of the assets to be acquired. b. Identify the alternative sources of financing including the terms and conditions, the effective cost, and the maximum amount of financing from each source.

c. Ascertain the desirable debt-equity ratio, the relationship between the financing that can be obtained from creditors and financing that can be provided by stockholders.

d. Establish the project’s financial policy.

MAJOR PARTS OF FINANCIAL STUDY

The major parts of financial study are (1) statement of assumptions, (2) projected financial statements, (3) possible sources of outside financing, (4) details of various amounts contained in the projected financial statements, and (5) analysis of financial projections.

STATEMENT OF ASSUMPTIONS

Assumptions are plain statements about the possible future behaviour of certain factors affecting a project. They provide specific basis in the preparation of financial projections if actual data are not available. This absence or unavailability of actual data necessities making of valid assumptions-reasonable and…...

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