Understanding Financial Feasibility in Project Management

A feasibility study is conducted to evaluate the practicality of a project or system by identifying its strengths, weaknesses, opportunities, and threats in the natural environment. The study aims to assess the resources required to carry out the project and its potential for success. The two criteria used to assess feasibility are the cost required and the value to be attained.
The primary objective of a feasibility study is to provide an unbiased evaluation of a proposed project’s technical, economic, financial, legal, and environmental aspects. This information helps decision-makers determine whether to proceed with the project or not.

Parameters for Financial Viability Assessment in New Projects

To assess the financial viability of a new project, a cost-benefit analysis is conducted to determine its viability, cost, and benefits before allocating financial resources. This process serves as an independent project assessment that enhances project credibility by enabling decision-makers to evaluate the positive economic benefits the proposed project can provide.

For a new project, the following parameters can be used to determine its financial viability:

• The project’s anticipated total cost
• Project financing details, including the capital structure, debt to equity ratio, and promoter’s percentage of total cost
• Investment already made by the promoter in a different company
• Projected cash flow and profitability

To determine the financial viability of a project, a thorough financial analysis is conducted which includes the following:

• Computation of Pro-forma Financial Statements
• Capital Budgeting

A. Computation of Pro-forma Financial Statements

Pro-forma financial statements depict the financial projections over the forecast period. These statements play a crucial role in understanding how the business will be performing financially and help in quantifying the financial milestones over the projected period. Following are the Pro-forma financial statements:

• Pro-forma Balance Sheet: Reports the firm’s financial position at a given point in time.
• Pro-forma P&L Statement / Income Statement: Summarizes the financial performance of the company over a specified period.
• Pro-forma Cash Flow Statement: Provides aggregate data regarding all cash inflows & outflows.

B. Capital Budgeting

Capital Budgeting is a crucial planning process which is used for decision making of the long-term investment. It helps in deciding whether the projects are fruitful for the business and will provide the required returns in the future years.
Following are the major techniques used in capital budgeting decisions:

• Profitability Index
• Payback Period
• Net Present Value (NPV)
• Internal Rate of Return (IRR)
• Return on Investment (ROI)

Bottom Line

A feasibility study is a crucial step in assessing a project’s viability. A feasibility study that evaluates a project’s viability, costs, and advantages must consider its  financial feasibility. Making informed decisions regarding project management and resource allocation requires having a solid understanding of financial feasibility.

Get Free Consultation

Would you like to rate us on Google?      Yes    No

HLB HAMT - Audit, Tax, Accounting and Business Advisory

4.8

Based on 176 reviews

review us on

Varun R Chandra

07:38 25 Apr 21

HLB Hamt is highly recommended! They have the quality of services that would satisfy your needs. I'm glad I found them.

Giuseppe Assi

06:20 31 Jan 21

I HAD A GOOD EXPERIENCE WITH HLB HAMT DUBAI. THEY HAVE A VERY PROFESSIONAL TEAM, GOOD QUALITY OF SERVICES, GOOD VALUE... FOR PRICE.I RECOMMEND THIS COMPANY.read more

Mohamed Sheriff

16:16 28 Jun 20

Experience with HLB Hamt in audit experience is great pleasure. They deploy well qualified accounts team for audits.... And the amount of checking they perform give the management of the company confidence that internal controls are well in place. We are glad to see they have high standard of audit practices.read more

218141 JOSEPH THOMAS

16:20 23 Jun 20

Professionally managed firm with commitment to the engagements taken. My company and its group are assigning our... requirements for last 12 years to HLB and we don’t have any negative remarks on any assignments.read more

PMI

07:14 23 Jun 20

In my opinion, HLB Hamt is one of the best professional firms in UAE after big4. Excellent client service, professional... and competent staff and timely delivery are their strength. Over the years they have developed the infrastructure and skill set to handle multiple verticals ie, audit, tax services, consulting, IT support etc.Wishing HLB Hamt team all the very best.read more

RAVI CHOKSI

08:28 21 Jun 20

Thank you Team HLB hamt...Your internal auditing team put the good amount of time and inputs in helping the... organisation making considerable improvements throughout the organisational working structure and helps in building the better business.Thanks.read more

Maharajan Subramaniam

18:17 06 Jun 20

High-Performing IT Teams, I'm impressed with the knowledge level of their deputed staff, audit procedures, and... checklist adopted. Mr. Vimal especially understand the requirement and provide solution not only technical feasibility and also considered budgeting. We’re confident in their abilities.read more

Mohammed L

08:07 05 Jun 20

We have been working closely with them on payroll services for quite sometime.They provide very professional... services,experts in domain and excellent support. Would recommend them.Cheers.read more

ROY ROSHAN VIVIAN

06:32 04 Jun 20

Very professional team. Vimal has always given us good solution advice for various Software and IT Infra projects. We... are very Extremely satisfied working with him and his team. Wishing them success.read more

Basil Daniells

05:55 03 Jun 20

I have worked with HLB as a partner of Sage for about 2 years, they were dedicated to the success of the partnership... and kept aligned with the business plan that was agreed between our two companies. They are always ready to go the extra mile for a customer and don’t shy away from challenging circumstances. Keep up the good work and wish you all the success in the future.read more

Amar Kashyap

19:28 02 Jun 20

Team of well qualified and organised professionals. Their reports are not based on numbers first they will understand... their client and their business. They are highly recommended and trust worthy.read more

Radz de Jesus

16:03 02 Jun 20

We're glad to have found HLB Hamt to conduct the IT audit and risk assessment for our organization. We have learned a... lot from their team during that first project. And since then, we've continued to be in touch with them. Mr. Vimal especially is very good at presenting technical concepts in simple yet interesting ways that non-IT and business people alike would easily catch. We are very happy with the professionalism and quality of service they provide. They leave their clients nothing short of satisfied. Highly recommended.read more

Next Reviews