Posts Tagged ‘financial feasibility study’

Financial Feasibility Study

According to Wikipedia, financial feasibility can be judged by the total estimated cost of the project, financing of the project in terms of its capital structure, debt equity ratio and promoter’s share of total cost, existing investment by the promoter in any other business and projected cash flow and profitability.

Financial feasibility study determines how much start-up capital is needed as well as sources of capital and returns on investment. It is an analysis of the total costs of a proposed project and the potential income that the project can get.  It the potential income of the proposed project can cover all the costs, then the project is financially feasible.

Your financial feasibility study should analyze the start-up capital requirements, capital sources and returns for investors. Start-up capital is a cash you need to start your business and should keep it running until it is profitable. Sources of capital for your business include investors, bank business loan, large corporations and your personal money from your savings and checking account.

Return on Investment also known as ROI is significant measure in investing. The return on investment is calculated by an investor to measure the performance of an investment and compare the efficiency of a number of different investments. The formula for Return on Investment (ROI) is:

ROI = net profits before tax / share holders equity

In all the components of feasibility study, financial feasibility should be completed because it is use to evaluate and make sure that the project or business will live it up to its performance expectations.