The feasibility analysis
A feasibility analysis provides insight into the risks and returns of the company. It is an important analysis in the business plan.
Read more: view on linkedin
I.1 How much is my euro worth?
The company analysis looks at the returns of the company and the associated risks. Two things are important for this:

The investment to be made in relation to the return that can be expected for the company.

The time when a certain return can be expected. Money has a socalled time value because an entrepreneur has to deal with interest. A return achieved now is therefore more valuable than a return achieved in the future. The entrepreneur can receive more interest from a bank on an amount that is now received. The value of a euro therefore depends on when it is received.
I.2 Analysis without the time value of money
The feasibility of a project or company can be estimated by calculating the return period of an investment (the payback period) . This does not take into account the time value of money.
The payback method uses the socalled cash flows and the payback period . The liquidity budget can be used to determine the cash flows . The cash flows (k) of a company are calculated for the entire period that the company is running. Three phases can be distinguished:

Company start at K _{0} = the initial investment (negative amount)

The maturity of the company at K _{1} through K _{(x1)} ; = the operating result after payment of taxes + depreciation

The end of the project at K _{x} = the operating result after payment of taxes + depreciation + salvage value
It then looks at how long it will take before the company earns back the initial investment. This period is called the payback period . Risks associated with the company can be made transparent by using scenario planning. For this purpose, the socalled worst case, expected case and best case scenarios are devised for the business plan. A plan is feasible if it also has acceptable outcomes in the worstcase scenario.
I.3 Analysis with the time value of money
The net constant value method does take into account the time value of money in its feasibility analysis. The method calculates the company’s cash flows over the same three stages as the previous analysis (i.e. start, maturity, end). The cash flows are calculated according to this method as follows:

K _{1} = 1/(1 + interest) ^{1} x cash flow;

K _{2} = 1/(1 + interest) ^{2} x cash flow;

K _{3} = 1/(1 + interest) ^{3} x cash flow;

etc.
The net present value is the sum of all cash flows received for the entire period that a company or project is running. With a positive net constant value , a company is economically viable. A company is only really economically profitable if the net constant of a company is higher than the yield that the investment money would receive if the investment money were put in the bank. The interest that banks give to their customers is used in this analysis as the discount rate (a fixed constant). This percentage is used when calculating the net constant value to gain insight into when a company is economically viable. In a risky venture, the value of this foot is increased.
I.4 Analyzing the balance sheet and profit and loss account
A company must be sufficiently liquid to meet shortterm debts. It must also pursue a sound financial policy in order to be able to pay off longterm debts. It is therefore very important for a company to have a good insight into the opening and closing balance sheet and the operating budget .
There are three ratios that provide insight into a company’s shortterm liquidity:

Current ratio ( CR ). This ratio reflects the ratio between the assets that can be converted into cash in the short term and the short – term debts . It is calculated by the calculation key CR = current assets / current liabilities. A ratio of 1.5 to 2 is considered sufficient to be sufficiently liquid.

Quick ratio ( QR ). This ratio excludes the company’s inventories from its calculation of liquidity. According to some, a company with few inventories has poor bargaining power. The ratio is calculated by the calculation key: ( QR ) = ( current assets – inventories) / current liabilities.

Net working capital (NLF). This ratio reflects the financial scope that the entrepreneur has. The ratio is calculated by the calculation key: NLF = current assets – current liabilities.
The current assets are the assets that can be liquidated in the short term (think of stocks, debtors, bank and giro balances). The shortterm debts are the things that have to be paid back in the short term (think of creditors, the shortterm loans). To get a good insight into the company’s liquidity, it is useful to calculate the ratios for subsequent periods.
The liquidity of a company to meet its longterm obligations is called solvency. This can also be calculated on the basis of three ratios:

equity ratio (ER). This ratio provides insight into the percentage of equity in the company. It is calculated by the calculation key: ER = (equity/total assets) x 100%

Debt ratio (DR). This ratio provides insight into the percentage of borrowed capital in the company. It is calculated by the calculation key: DR = (debt/equity) x 100%

Debtequity ratio (D/E ratio). This ratio provides insight into the relationship between equity and debt. D/R = debt / equity. The right ratio for a company depends on the type of company and whether the company works with tangible or intangible products.
0
0