Assessment of the effectiveness of investments.
Investment efficiency is determined by solving a set of tasks. These include evaluating project feasibility, absolute project efficiency, and comparative effectiveness.
Project feasibility means the possibility of its implementation subject to all parameters of a financial, technical and economic nature. The absolute effectiveness of the project implies an excess of the significance of the results achieved over the expenditure of resources. Comparative effectiveness is understood to mean possible efficiency when comparing various alternative project options.
Investment efficiency of an individual project.
The possible effectiveness of individual investment projects is characterized by a system of indicators that reflect the ratio of resource and material costs and future results in the interests of participants in the investment project. At the same time, the effectiveness of investments can be reflected by the ratio of the project result to the costs incurred. The investment effect can be calculated as the result of the difference between the result and the costs.
Types of investment efficiency.
There is financial (commercial), budgetary and economic efficiency of investments.
Commercial - characterizes the investment attractiveness of the project for investors and its financial viability. Budgetary - shows the financial consequences of the project for the budgets of the federal, regional or local levels. Economic - takes into account costs and correlates them with the results, while taking into account all expenses that go beyond the direct interests of the participants in the investment project, which can be expressed in terms of value.
When assessing the effectiveness of investments, the socio-economic efficiency of investments is also carried out, that is, all possible economic and social consequences of the project are investigated, as well as all the costs that will be associated with social events and environmental protection activities .
Results and cost indicators are evaluated as part of the billing period. Its duration depends on the duration of the creation and development of the facility, the service life of technical equipment, the conditions for achieving the planned profit characteristics, as well as the specific requirements of investors.
The effectiveness of investments is evaluated according to the UNIDO methodology. In Russian practice, the Methodological Recommendations developed on it are used to assess the effectiveness of projects with a view to selecting them for future financing. Valuation methods are divided into simplified, applied for the initial preliminary selection and those that take into account the change in the value of money over time.
Investment performance indicators .
The return (payback) period expresses the relationship between net investment and income from the implementation of investment decisions.
A simple rate of return expresses a portion of the cost that is reimbursed in the form of profit attributable to one investment planning interval.
The accounting rate of return shows the effectiveness of investments as a percentage of cash inflows relative to the initial amount of investment.
The accounting payback ratio is calculated by dividing the annual average profit by the average investment cost.
Assessing the effectiveness of investment is of great importance in doing business. In case of misuse of the provided investment funds, low returns, their lack, you need to think about the need to select the most effective methods of analysis of projects being implemented or planned for implementation.