The concept and types of investment projects, methods for their evaluation

Investment projects are created and pursue the achievement of certain goals that are associated with generating income. But they are not always successful - many of them are frankly failing. To minimize the likelihood of negative events, it is necessary to have a high-quality theoretical base. And the concept and types of investment projects will help to start here .

general information

First of all, it should be noted that this is a project. Although in the future its features can be interpreted in relation to the ongoing activities. The following moments are used to characterize the project:

1. Time limit.
2. Cost of sales.
3. The implementation algorithm for individual stages and time intervals.
4. Unique result.

But one should not be fooled that an investment project is simply a set of documents, which many people sin. After all, its essence is the implementation of a certain innovative idea, which has already been embodied in a specific technology or equipment with a specific investment volume. The project is carried out by performers in a certain social and natural environment with limited resources for its implementation. That is why it is necessary to clearly distinguish between different types of investment projects.

About essence

So what are they? The investment project, in fact, is an advertisement and a description of the idea, contains a commercial proposal for those who decide to invest in a business, an assessment of effectiveness, a business plan for functioning, as well as a guide to the implementation of the plan. That is, the whole range of activities that will be perfect to achieve the stated goal. To designate it, the concept of "investment project" is used. But it should be remembered that each object of relations has its own goals. So, for example, any investor wants to maximize profits. This rule always applies, even when working with, for example, social objects. For example, an increase in profit in the future at production facilities by increasing the social conditions for workers, improving their comfort and improving the quality of work. From this we can conclude that the species diversity of investment projects is very large.

About classification

Initially, it is necessary to identify the signs by which we will be guided. These are: pursued goals, scope, scope and life cycle. Let's take a closer look at this:

1. The common goal is to get the maximum possible profit. But there are some moments that give it a characteristic color. Their role may be the solution of social, environmental and economic problems. As narrower options are the expansion of existing production, the increase in the number of services rendered or the launch of a new line of goods.
2. Scope of implementation. Depending on where the project is created, it can be production, social, scientific, technical, environmental, financial and organizational. It is possible that a combination of several areas of implementation.
3. To assess the scale, both the amount of invested funds and the environmental impact of the project results can be estimated. In the first case, large, medium and small are distinguished. The former are measured in billions of dollars. Medium-sized projects start at ten million. Anything smaller than this is small. The effects distinguish: local, sectoral, regional and national projects.
4. The life cycle is used for characterization. It includes the nucleation of an idea, the development of all necessary documentation, implementation, the period of effective production and subsequent closure. But when considering the types of investment projects, they take into account the period from the start of investments and until the facility reaches the specified level of work. Allocate short, medium and long-term projects. Their duration is, respectively, up to 5, from 5 to 15, more than 15 years.

Depending on the positions from which all this is considered, different types of activities in the investment project differ.

About the content

During the life cycle, constant changes occur. This does not apply only to structure. The entire life cycle is divided into certain stages. They, in turn, can be characterized by the depth of elaboration of existing ideas. This is influenced by the used set of different calculation methods and research tools. What is meant in this case? In other words, a project scenario is drawn up, the goals pursued are displayed, possible results are evaluated, as well as what material and financial resources will be needed for implementation. What is included in the content? First of all, it is necessary to mention the resume of the project, as well as the description of its initiator. Then follows the main idea and directly the essence of what is being proposed. After you have formed what you have to deal with, market analysis is carried out. After that, attention switches to sales, raw materials, materials, labor. Once all this has been evaluated, an implementation plan is drawn up. It requires justification and reduction of information to one unit. For this purpose, the financial plan of the project is drawn up. All possible risks are evaluated. So, briefly on what should be, we went through. But why are these components highlighted?

About the meaning and importance

So, why exactly the content discussed above? To do this, you can choose the following explanation:

1. Summary. Used to briefly outline the contents of an investment project.
2. Characteristic. Describes the financial position of the project initiator, his experience in the industry and the market, as well as all other participants.
3. The main idea and essence. It is necessary to describe directly the investment project itself, as well as the mechanisms and principles for implementing the proposed idea. It also discusses preferences and advantages over other offers.
4. Analysis of the market shows how much a producer can potentially occupy in it if the proposed project is successfully implemented.
5. The study of the necessary resources, as well as possible sales, allows you to assess the need for them and the right amount to maintain non-stop work.
6. The implementation plan describes the stages of the implementation of the investment project and identifies all organizational measures that must be implemented for its implementation.
7. A financial plan is needed to determine the amount of monetary resources that you need to invest, and for how long to get a return.
8. Risk assessment considers pessimistic and optimistic options for work and possible problems.

But that is not all.

About the stages let us put in a word

How is the investment project implemented? The following stages are conventionally distinguished:

1. Pre-investment. At this stage, a complete list of works is compiled, which will be reflected in the investment project scenario. This stage takes away 1.5% of all funds that are invested in the stage.
2. Investment. At this stage, a list of works with objects that have decided to become investors, that is, with investors, is included. The necessary amount of financing, as well as the order and sequence of investments are agreed. In addition, suppliers of equipment, technologies, conditions for their transfer with subsequent installation are considered. The staff, qualification level of personnel is also determined, contracts are concluded with suppliers of components and raw materials, electricity, water, heat resources. It is here that the largest part of the investment is realized. Its part in a percentage ratio can reach 90%. Why so much? The fact is that an investment project in the first years may not be profitable, therefore, wages and working capital are provided at first as additional investments.
3. Operational. This stage usually lasts for years and decades. It all depends on the investment project and the period of moral or physical depreciation of the main equipment. During this period, all announced goals should be achieved. Up to 10% of investments fall at this stage.
4. Liquidation. It comes after all the possibilities have been exhausted, a drop in profits is observed, or in general, costs exceed revenues. In this case, the object must be reconstructed or liquidated. In the first case, again, investments are needed. At this stage, all stages of the work are analyzed, the results achieved, existing errors are identified and conclusions are made to avoid them.

About other classification points

So, what else can be the types of investments? The investment project is still classified:

1. Depends on the purpose. As an example, we can cite the release of something new, the preservation of the old assortment (but with improved quality), an increase in production volumes, and the solution of various problems of an economic and social nature.
2. The riskiness of the project. There is little choice. You have to choose only between reliable and risky. But their degree is a separate issue. State projects have high reliability, while the most risky are those associated with innovation.
3. Relationships are independent, alternative, and collaborative.

Put a word about efficiency

So, we already have something. And how to evaluate it? Specially for this purpose, types of efficiency of investment projects are considered. How much money the investment will bring depends on the quality of the analysis and evaluation. At the same time, several fundamental points are distinguished:

1. Although the project is considered as a whole, each of its stages should be carefully analyzed.
2. For the assessment, it is necessary to model cash receipts and expenses.
3. When choosing from several alternative projects, you need to conduct a comparative analysis to select the most optimal one.
4. The time factor and inflation should be considered. Take computers, for example. Once this sophisticated electronics cost a fortune and occupied buildings. But gradually its price fell, capacities grew and now simple microcontrollers worth several tens of rubles can show better results than computers of the 60s and 70s.

The most effective types of investment project evaluation are:

1. Financial.
2. Economic.

Speaking about the types of evaluating the effectiveness of investment projects, it should be noted that each of them is created for the pursuit of certain goals that must be dealt with in order to obtain accurate data about the result. Let's look at them in more detail.

Financial assessment

This approach is based on cash flow analysis. In addition, it is being examined whether there are enough existing financial resources to realize what was planned on time. All types of cash flows of an investment project should exceed costs if there is a desire to get a good result. Although their separation, as a rule, is not very significant, although it may require increased attention (as, for example, in the case of loans). With the costs you need to be more careful. So, in this case, the analysis must take into account:

1. Purchase of equipment / raw materials / semi-finished products.
2. Taxes.
3. Expenses of an operational nature.
4. Overhaul and more.

If it is possible to service all monetary obligations at any stage, then we can talk about the liquidity of investment projects. And if a positive balance is formed, then it is generally recognized as profitable. The only question is how and how much. Regardless of what types of financing investment projects are involved, it must necessarily go into the plus. Otherwise, there will be losses and low efficiency.

Economic assessment

She deals with the feasibility of investments from the position of preserving their purchasing value during the implementation of the idea. As an example, we can cite the following types of investment project efficiency:

1. Profitability.
2. Payback period.
3. Simple and internal rate of return.
4. The current cost of the project, taking into account the time parameter.

Additionally, all these indicators are divided into simple and dynamic. The difference between the second is a more significant exponent and use in an in-depth analysis. This situation arose due to the fact that dynamic indicators use the discount method. Economic assessment allows you to get acquainted with a large number of characteristics.

How to conduct business?

In practice, the assessment must take into account both the financial and economic approach. After all, this will allow you to get a more holistic picture. It is also necessary to take into account the different types of risks of investment projects that are associated with personnel, government services, partners, suppliers. Care must be taken to minimize all possible risks. After all, if the project itself is good, but funding suddenly breaks, then it will be very sad. And with a high degree of probability it will lead to the fact that the initial investment will be lost. Fortunately, in many cases, you can insure activities. It is not in vain that there are different types of financing of investment projects. So, if the founders do not have enough money, then you can always contact the bank for a loan. But this should be done only in cases where there is a strong confidence in success, backed up by data. So all types of investment projects are considered.