Managing Financial Resources and Decisions

Project Proposal
Vimukthi Adithya
MODERN CLASS TAILORING
Managing Financial Resources and Decisions
Individual assignment
Acknowledgment
I would like to thank Mrs.GunathmaGunawardena for sharing her valuable ideas with us
regarding Managing Financial resources and decisions. Her lecture gave me some valuable
points and the hand-outs that were given came in handy while doing the report. My friends at
ICBT who helped at various situations and the books at the library helped me to gain a good
knowledge.
Executive summary
Mr. Nassir Husain, a well educated young man was planning to set up his own business and
was seeking for professional advice on whether to go ahead with the investment. I took the
responsibility of helping him out. Firstly a SWOT analysis was undertaken, which identifies
the Strengths, Weaknesses, Opportunities and the Threats of the organization. The
environmental scanning was done, which was mainly a PESTEL analysis. Then moving on a
Trading Profit and Loss account, Balance Sheet and cash flow statement were prepared for
benchmarking for the first day of trading. Then Investment appraisal techniques were taken
into account. Investment appraisal techniques could be identified as the methods used to
evaluate the decisions taken by the business to invest in various projects. Under this
Discounted payback method, Average Rate of Return, Net Present Value and Internal Rate OF
Return was considered. The company is likely to receive profits after 4.68 years of operation
and is likely to receive 7.3% as its ARR and a positive NPV of Rs. 4049750. IRR was
calculated and an estimated figure of 11.01% was achieved. These techniques were later
evaluated and these were also evaluated against depositing money in the bank.
Then the most important area was taken into account, which is financing. Financing simply
means providing funds for business activities, making purchases or investing. A large
number of sources of finance were identified; both internal and external factors were taken
into account. Few internal factors are owners own savings, retained profits, sale of assets and
cutting down stock levels and few external factors that were identified are issuing of shares,
debentures, bank overdraft, bank loans, leasing, higher purchase, creditors, debt factoring and
government grants.
Finally after considering all the available sources of finance it came down to owner own
savings (own investment) and obtaining a bank loan. Both methods were studied carefully,
evaluated and later it was decided to go in with the bank loan. Importance of financial reports
was considered later and the ways it affects it affects financing source was considered. At the
end of the report further enhancement methods were identified, these were the methods which
Mr. Husain could use to improve his business, retain customers and also to attract new
customers.
In conclusion it was understood that the project cannot be evaluated only with financial
factors. Non financial factors also should be taken in to account. Finally considering all the
factors it was decided that going on with the investment and starting up a new business is
good.
Table of Contents
Contents
1
Introduction................................................................................................................................1
2.YSWOT Analysis.................................................................................................................2-4
2.1 Enviromental Scanning..................................................................................................4-5
3. Financial Statements .............................................................................................................5
3.1.Trading Profit and loss account ...................................................................................5-6
3.2.Balance Sheet ..7
3.3.Cash flow statement 8
4. Time line of Investment ....8
5. Investment Appraisal techniques . 9

5.1 Discounted payback period 9
5.2.Average Rate of Return. 10
5.3. Net Present Value ..10 -11
5.4. Evaluaton of the investment appraisal tecniques11
5.5. Evaluation of the investment appraisal techniques with respect to depositing money in
the bank12
6. Calculation of IRR 12-13
7. Finance 13
7.1. Sources of finance ..14 -15
7.2.Evaluaton of sources of Fianace .15- 17
7.3 Ownersa own savings Vs Bank loan 17 -18
8. Imapct of financing source on prevously derived financial statements . 19
9. Futher enhancements .. 20
10. Conclusion and recommendation ..21
Refernces .22
1. Introduction
Starting up his or her own business and becoming an Entrepreneur is a dream of any person.
It is not an easy task; it needs hard work, determination and commitment. Before starting up a
business it is always advisable to do a good research about the market and to have a good
understanding of what is happening market and in the economy. It is said that the
entrepreneurs should be innovative, efficient, and creative and also be able to bear risks. An
essential analysis that should be done when planning to set up a new business is a SWOT
analysis.
Mr Nassir Husain was seeking for professional advice on starting his own business. Mr.
Husain, a well-educated young man is having a plan of starting his own Tailoring industry
which is mainly providing clothes for weddings and also ready -made formal and casual
clothes and he is lacking good professional knowledge about this industry. So I have taken
the responsibility of helping him to make his decision a successful one by addressing on
various important areas and aspects through this report. I hope that this report will be very
helpful to him.
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2. SWOT Analysis
SWOT, Strengths, Weaknesses, Opportunities and Threats these are common things that is
there in any organization. The business might be big, small, new and old but these are
common to any of them. It is always advisable to do a good SWOT analysis before starting
operations. SWOT is a strategic planning tool that helps a business owner to identify his or
her own strengths and weaknesses, as well as any opportunities and threats that may exist in a
specific business situation. A SWOT analysis is most commonly used as part of a marketing
plan. The SWOT analysis can be usually categorized into two as Internal and External.
Strengths and Weaknesses are the internal factors and Opportunities and Threats come under
the External environment. Internal factors are usually inside the organization which could be
controlled but external factors are outside the organization which is usually uncontrollable.
Figure 1 SWOT Analysis

(http://mobile-cuisine.com/business/developing-a-swot-analysis-for-your-mobilefood-business)
I have done a brief SWOT Analysis for Mr Husain after doing a good research on the
tailoring industry and also after getting ides, views from him and also by taking his mission
and vision into account. The following is the SWOT Analysis.
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STRENGTHS
A good unique and strong name MODERN CLASS TAILORING which has the
ability to attract customers.

Well experience staff. Has recruited fashion designers who have at least 5 years of
experience in the industry.

Innovative ideas. Decision taken to design and make suits for the groom on his
wedding and also for the homecoming and also to provide dresses for the brides too,
where most of the competitors wont do.

Affordable prices. Prices are set below the prices of competitors and also special
discounts given for the first few days if operation.

High customer satisfaction and valuation. Special air conditioned waiting areas for
customers with WI-FI facility, magazines, novels, etc.

A friendly and calm person, who has the ability to attract people and his qualities, will
help to retain the customers in future.

Have a large amount as own savings, which could be used as investment to the
business.
WEEKNESSES
Limited funds available and need to find sources to obtain funds.
Less experience in the industry and lack of knowledge about the market.
Higher costs
Have certain issues when selling goods for the friends, where will have to offer them
discounts and sell them at low prices
OPPORTUNITIES
Possibility to expand into other areas of the county after some time.
Collaboration with a small snack/juice bar.
Technological advancements in machinery, which makes the production faster and
efficient.
Ability to capture higher market share and to get a high customer base since all the
high income, middle income and the low income people are targeted.
THREATS
High competition.
Changes in customer taste and preferences
Various government policies and legislations
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2.1 Environment Scanning

Environmental scanning can be defined as the study and interpretation of the political,
economic, social and technological events and trends which influence a business, an industry
or even a total market. The factors which need to be considered for environmental scanning
are events, trends, issues and expectations of the different interest groups. (This is how
Wikipedia describes it)
(wikipedia)
Manly a PESTEL Analysis is done under environmental scanning, whichincludesPolitical,

Economic, Social, Technological, Environmental and Legal factors.
Political Should have a clear knowledge and an understanding of the political stability and
also should consider the government rules and regulations on certain business.
Economical It is very important to have a clear view of the economic standard of the
country and should consider the economical changes, the consumer behaviour patterns, their
taste and preferences, changes on income levels and spending before starting up operations.
The economic growth of the country, inflation rate, interest rate and exchange rates are also
important factors that should be considered here.
Social Should take into account the culture, traditions and values of different people and
should consider the various segments of population.
Technological In here the technological changes should be taken into account and should
be updated with the latest changes in technology and most importantly must be willing to
accept them and use it.
Environmental Should have a special concern on the environment, the business should
always try to be a company that doesnt harm or pollute the environment. The company
should also be able to adapt to various environmental changes.
Legal Should take into account the various types of laws imposed by the government and
should be willing to follow them.
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3. Financial statements
3.1 Trading, Profit and Loss Account ( Income statement) for the 1st day of trading
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Modern Art Tailoring

1st Operation Date
Financial Statements in Sri Lankan Rupees (LKR)
Revenue
350000.0
Gross Sales of services
Less: Allowances and
Discounts
Net Sales
30000.00
Beginning Inventory
0.00
150000.0
320000.00
Cost of Sales
Add:
Inventory Available
Less: Ending Inventory
Cost of Goods Sold
Purchases
Indirect
Expenses
6,500.00
0.00
0.00
156500.00
Gross Profit / Loss
163500.00
Expenses
Printing
of
broachers/Advertising
Bank Charges
Insurance
Miscellaneous
Office Expense
Telephone
Travel
Utilities
Vehicle Expenses
Wages
Total Expenses
30000.00
3000.00
1500.00
12500.00
8,500.00
550.00
3500.00
4000.00
7000.00
6000.00
76550.00
Net operating Income
86950.00
Other Income
Interest Income
Total Other Income
Net Profit / Loss
13500.00
13500.00
100,450.00
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3.2 Balance Sheet (Statement Of financial Position) for the first day of
trading
ASSETS
Current Assets
Cash
Total Current Assets
Fixed Assets
Land
Buildings
Equipment (net)
Furniture & fixtures (net)
Total Net Fixed Assets
TOTAL ASSETS
55,000.00
55000.00
2,000,000.00
5,800,000.00
325,700.00
500,000.00
8,625,700.00
8,680,700.00
LIABILITIES
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Current Liabilities
Accounts payable
Bank O/D
Total Current Liabilities
30,700.00
150,000.00
180,700.00
Total Long-term Liabilities
3,500,000.00
0.00
3,500,000.00
SHAREHOLDERS' EQUITY
Capital
Total Shareholders' Equity
TOTAL LIABILITIES & EQUITY
5,000,000.00
5,000,000.00
8,680,700.00
Long-term Liabilities
Bank Loans
Other long-term liabilities
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Description
Year 1
Year 2
Year 3
Year 4
Year 5
Total Cash inflows

Total cash outflows
30000000
(10000000
50000000
(15000000)
55000000
(25000000)
60000000
(35000000)
50000000
(3000000
Net Cash flows
)
20000000
35000000
30000000
25000000
20000000
3.3 Cash Flow statement

Table 1 Cash flow statement
4. Time line of investment

Description
Year 1
Net Cash flows

20000000
Market growth rate
5%
Net Cash flows after the market 21000000
Year 2
35000000
5%
36750000
Year 3
30000000
5%
31500000
Year 4
25000000
5%
26250000
growth
The Initial investment of the project is at Rs. 100000000 and the market growth rate is at 5%.
The Following figures which are included in the investment time line are arrived by
increasing the net cash flow which obtained each year by 5%.
Table 1.1 Cash flow statement
After developing the time line of investment which has a market growth of 5%. The
following is understood.
The Initial investment of the project is Rs. 100000000 and it has cash flows as follows
Year 1 21000000
Year 2 36750000
Year 3 31500000
Year 4 26250000
Year 5 21000000
5. Investment Appraisal Techniques
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Yea
200000
5%
210000
Investment appraisal techniques could be identified as the methods used to evaluate the
decisions taken by the business to invest in various projects. E.g. Construction of a building.
These methods could also be referred to as financial methods. They play a major role in
helping a business to select the most suitable, profitable and the best option. Few investment
appraisal techniques are the payback period, Average Rate of Return (ARR), Net Present
Value (NPV) and Internal Rate of Return (IRR).
5.1 Discounted Payback Period

Payback period refers to the amount of time taken to recover the cost of a project; if it takes
more time, then the project should not be selected because any investor would like to recover
the cost as quickly as possible.
The Discounted Payback Period for the above mentioned time line is calculated below. The
discount rate is at 10%
Year
Cash Flow
Present value factor
Discounted cash flow
Cumulative discounted cash flow
0
1
2
3
4
5
(100000000)
21000000
36750000
31500000
26250000
21000000
1.00
0.909
0.826
0.751
0.683
0.620
(100000000)
19089000
30355500
23656500
17928750
13039347
(100000000)
(80911000)
(50555500)
(26899000)
(8970250)
4069097
Table 1.3 Discounted payback period

So the Discounted payback period = 4 + [-8970250] / 13039437 = 0.687, which is 4.687
years
So according to the calculated discounted cash flow method the project will give a profit after
4.687 years.
5.2 Average Rate of Return (ARR)

ARR will show the profitability of the project. It is the amount of profit or return that an
individual can expect from a certain investment.
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ARR = Average Profit / Cost of Investment *100

So the calculation of ARR for the above Investment is
Total cash flow
136500000
(-) Cost of Investment
(100000000)
Total Profit
36500000
Average Profit
7300000
Table 1.4 Average Rate of Return

So Therefore the ARR of The Project is = 7300000 / 100000000 * 100, which is at 7.3%
5.3 Net Present Value (NPV)

In this method the profitability of the project can be calculated, but in this method all the cash
flows are discounted for Inflation so this method is very accurate.
Year
0
1
2
3
4
5
Cash Flow
(100000000)
21000000
36750000
31500000
26250000
21000000
Discount factor (10%)

1.00
0.909
0.826
0.751
0.683
0.620

(100000000)
19089000
30355500
23656500
17928750
130020000
Table 1.5 Net Present Value

NPV = Discounted cash flows initial investment
Discounted cash flows = 19089000 + 30355500 + 23656500 + 17928750 + 13020000
Discounted cash flows
Initial investment
Net Present Value
104049750
(100000000)
4049750
Table 1.6 Net Present Value
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So the NPV is at 4049750 which is a positive figure so it is good and the project is
acceptable.
5.4. Evaluation of the investment appraisal techniques

In brief, what we can see is that there is no problem with going on with this investment. The
discounted payback period is approximately 4.68 years, which means the business is able to
cover the cost of investment during this period, which is actually not bad. But the problem
here is that it is debatable whether this could be achieved as calculated and expected, the
reason for this is that all these figures are forecasted cash flows, you are not 100% sure
whether you will be able to obtain the above mentioned cash flows and whether you are able
to cover the cost in exactly 4.68 years. This might take more time, which will then cause
problems for the business, but one thing you should keep in mind is that in every coin there
are two sides, so in here also sometimes a lower payback period could be obtained than of
forecasted, which is below the forecasted 4.68 years, Then it would be really great for the
company.
When we consider the ARR of the investment it is looking fair at 7.3%. It is actually not a
bad figure for a business to receive but not a very good figure too. When calculating the ARR
all the cash flows are taken in to account so this tends to be more accurate method. ARR is a
very simple method which will help to analyze the profitability of the business too. But once
again the problem here is that they are forecasted figures and under ARR these cash flows
havent been discounted, so this doesnt include the inflation or the real value of money.
The NPV of the investment is looking strong at Rs.4049750 and it is positive, having a
positive NPV means that it is always good to go into the investment and this indicates that the
business is profitable. Under NPV all the cash flows are discounted for inflation, so it is a
very accurate method. But the problem is that the NPV depends on the discount factor, which
in here is 10%.
5.5. Evaluation of the investment appraisal techniques with respect to

depositing the money in the bank.
Now comes the real question, this is where the decision making power, ability to take risks of
an entrepreneur comes in to play. It is really a tricky question. What do you do with your
Money? Save it in the bank and enjoy interest or take the risk and go and invest it. So what
could be understood here is that the initial investment is Rs. 100000000. So you have two
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options either save it or go for it. If the decision is taken to invest it, then you clearly can see
that the cost could be covered within 5 years, you have a strong Average Rate of Return and
also the NPV is positive, which indicates that profits could be earned in future with ease. Well
if option B is selected, which is to deposit the money in the bank you are able to enjoy a good
amount of interest and also loans could be received with ease from the banks. Well Rs.
100000000 is quite a large amount and well saving it in the banks will only give you that
right?, but imagine investing this amount in the business enjoying very large profits in future
with covering the cost within 5 years and here too if you are doing well in business you still
will be able to go for a bank loan if you need additional finance into the business, it is not a
necessity to save money in the bank to obtain a loan and receive benefits.
In conclusion after analysing both the options, what I feel is that it is good to go with the
investment and start up the business rather than just keeping the money in the bank. And also
the Investment Appraisal Techniques proves that the business will do well in future.
6. Calculation of IRR
IRR will show the rate at which the NPV of the project is Zero. When the NPV is zero then it
is break even. The following shows the NPV of the business when the discounting factor is
10%, when the discounting factor is 10%, the investment receives a positive NPV of Rs.
4049750 and under the IRR method, this NPV should be zero, which means that the
discounting factor should be changed accordingly.
The following is calculated by changing the discounting factor into 11%, which was at 10%
initially.
Year
0
1
2
3
4
5
Cash Flow
(100000000)
21000000
36750000
31500000
26250000
21000000
Discount factor (11%)

1.00
0.900
0.811
0.731
0.658
0.593

(100000000)
18900000
29804250
23026500
17272500
12453000
Table 1.7 Calculation of IRR

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When the discounting factor is changed from 10% to 11%, the discounted cash flows changes
to Rs. 101456250, which gives a NPV of 1456250 (101456250 10000000)
So we can clearly see that when the rate changes from 10% to 11% the NPV changes by
2593500 (i.e. 4049750 1456250).
Therefore 1% / 2593500 * 4049750 = 0.0156
This means that in order to make the NPV zero and break even the discounting factor
should be changed into 11.0156%(The figure might not be accurate, it is an estimation)
So in here we can clearly see that there is not much of a difference, in order to break even the
discounting factor should only be changed by 1.0156%, which I think that it will be easy to
negotiate since there is not much of a difference.
7. Finance
Financing simply means providing funds for business activities, making purchases or
investing. Well it is clearly understood that without money no business could be set up but the
challenge is to how to find this money, which in terms referred to as capital required.
Decision that any businessman could make is to how to obtain finance, when to obtain it and
from whom should it be obtained. Regardless of whether the business is new or old finance is
needed and there are a number of methods available to finance a business.
7.1 Sources of Finance

Sources of finance are mainly categorized into two as internal sources and External sources.
Internal simply means the finance that could be obtained within or inside the organization.
Few examples of internal sources of finance are the owners own savings, retained profits, sale
of assets and cutting down stock levels. External sources of finance are the ways where an
organization could obtain finance from outside sources such as through issuing of shares,
debentures, bank overdraft, bank loans, leasing, higher purchase, creditors, debt factoring and
government grants. The following diagram clearly shows the sources of finance available.
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Diagram 1.2- Sources of
finance
(http://www.dineshbakshi.com/mind-maps)
When
talking
about Finance it could also be classified into

two as debt finance and equity finance, other
than internal and external
Debt Finance This is when a firm raises
money
by selling bonds, bills or notes to individuals
and institutional investors. Few methods under debt financing are:
Financial institution mainly the banks fall under this and few methods such as
building societies and credit unions provide you finance too

Family or friends
Factor companies
Finance companies
Suppliers
Retailers
Equity finance This means raising finance through issuing shares of stocks to public. Few
methods are:
Self-funding owners own savings/ investment

Government grants
Stock market
Private investors
Venture capitalists
7.2 Evaluation of sources of finance

Well, the above mentioned methods are the sources available for Mr. Husain to use as
finance, and it is debatable whether all of the methods could be used. By analyzing well and
investigating, a proper, suitable method should be chosen
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Internal
Owners own savings (owners investment)

This is the least risky method, but this depends on how much money currently you
(Mr. Husain) have and how much he is willing to use as an investment. This could be
used as a long term source of finance.
Under this method no interest should be paid and no need to repay this, but the
problem here is that there is no certain limit the owner can invest, so the capital will
not be enough. Choosing this as the source of finance is clearly in the hands Mr.
Husain.
Retained Profits
Even though this Method is included by me, actually this is of no use now, because in
order to have some retained profits the business should have traded for at least 1 year.
So this cannot be included into a new business.
Sale of stock
This method should also be omitted, because the business should be functioning for
some time in order to have some stocks. This is not suitable in this situation.
Sale of fixed assets
Its doubtful whether a business could sell its fixed assets brought even before trading
begins, so this method is also not suitable in this situation.
Debt collection
This method should be used after some time of trading. Debtors are people who owe
money to the company. It is highly unlikely and impossible to have debts before
trading.
External Sources
Bank Loan
Well, this is one of the most important and a suitable method to finance the new
business. This could be identified as a long or medium source of finance. By using
this method you (Mr. Husain) is able o obtain a higher amount and this method is
good for budgeting.
Additional partners
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This is mainly suitable for a partnership business, if you (Mr. Husain) wish to convert
the business into a partnership and then new partners could be taken and with them
more capital come into the business. This is not a suitable method in this situation.
Share issue
Long term source of finance, which is mainly suitable for a limited company, but the
problem, is that in order to issue shares the company should be established well,
should have a good name and recognition and should be trading for some time with a
strong financial background.
Government grants
Another method that Mr. Husain could obtain, but all the businesses are not able to
receive grants from the government, the possibility of getting the grant is actually low,
but still he can try for it. This method has various conditions too. For example if it is
located in a highly unemployed area then grants could be received, because the people
in that area receives jobs so the unemployment level in the country falls.
Mortgage
This is a loan secured on property and under this method this has to be repaid on
installments. There are restrictions in this method and it is risky, because if the
company is unable to repay it then the property will be taken over,
Other external methods such as leasing, hire purchase and trade credit are not suitable
in this situation.
So finally it comes down to owners own savings (own investments) and bank loan
7.3 Owners own savings (own investments vs. Bank Loan)

Well, thats so eventually it comes down to the best two options available to Mr. Husain to
finance his business. It is own savings of him and obtaining a bank loan. His own savings,
which is also referred to as the own investment is an internal source and obtaining a bank
loan is an external source of finance. It is really debatable to which method to be used. In
order to make it more sensible and easy to understand I have done a small analysis of the two
methods, which will help you to have a understanding on which is the most suitable method
to use. The following table shows it clearly.
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Owners own Investment

This is a type of long term investment
Bank Loan
Type of long term or medium term
investment
Less risk involved under this method, since

the owner doesnt have to pay it back or This will have to be repaid in future, and also
rather here is no need of paying any interest
an interest will be charged, where this is not

applicable when using own savings.
The owner has the authority and the decision

making power on how much he should invest Unlike in the first option in here the owner is
and bring in as capital, but the problem under able to go for a higher amount depending on
this method is that whether this amount is his requirement and the bank too will give
enough for the business. There is a limit to him advice and provide assistance.
the amount that the owner can invest.
There are actually no legal documents or any

other paper work required here and the owner This
method
takes
time,
more
legal
will not have to travel to various places and documents to be done, more expenses on
get the work done, and most importantly he travelling and will have to keep securities or
will not have to keep any securities or use granters, and you are not 100% sure
granters.
whether you will receive the loan from the
bank
Table 1.8 Owners own investment vs Bank loan
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In my opinion I feel that the above done comparison will help you to identify which method
to choose, it is actually up to you (Mr. Husain) to decide, which is the best method that could
be used to finance the business.
If you feel that you have enough money with you then you can go with option, but if more is
needed for financing then bank loan is the most suitable method because you will be able to
the amount according to your requirement. What I feel is that it is better to go with a bank
loan.
8. Impact of financing source on previously derived financial

statements
Financial reports are prepared at the end of the financial year and these are usually the
statements that show the financial position of the company. "The objective of financial
statements is to provide information about the financial position, performance and changes in
financial position of an enterprise that is useful to a wide range of users in making economic
decisions." Financial statements should be understandable, relevant, reliable and comparable.
Reported assets, liabilities, equity, income and expenses are directly related to an
organization's financial position. (This is according to Wikipedia)
(wikipedia)
The financial statements of the company are as follows
Comprehensive income statement
Statement of financial position
Cash flow statement
Statement of changes in equity
Notes to financial statement
These financial reports are prepared for later reference and play a major role in future. These
financial statements play a huge role when a company goes to obtain finance, especially
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when it wishes to obtain a bank loan and one of the most important aspects that the banks will
consider is the financial statements, they will have a good look at the financial statements of
the company especially the income statement and the statement of financial position and
depending on the profits obtained by the company the banks will decide whether to grant the
loans or not. The company should always prepare their final accounts in a true and fair way.
When talking about managing the operational activities in order to achieve the planned
results, the company will have to be very careful and will have to manage it in a way that it
will not affect their final accounts. The company will have to try and increase their sales and
also the profits and will have to manage the expenses well
9. Further Enhancements
If the decision is taken to go for a new investment then Mr. Husain will have to implement
various things and will have to consider few factors.
He should provide a good, quick service to the customers. Customer satisfaction is the
most essential element and the retention of existing customers and the attraction of
new customers will depend on the service given to them and also on their satisfaction.
Cleanliness is also a one major factor that should be taken into account, the building
should look clean and pleasant and the employees should wear proper and clean
clothes.
Should have good, experienced and talented designers who are able to adjust
according to the customer needs and preferences.

Good attractive packaging, after sales services and good return policies.
The above mentioned points are few factors that would help Mr. Husain to make his new
business a success.
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10. Conclusion and Recommendations

In conclusion, what I feel is that there is no issue with going on with this investment. Quicker
payback period, higher profits, positive NPV. Considering these factors Mr. Husain should
invest his money for the new business, but one thing that we should keep in mind is that only
with financial factors this decision cannot be justified. Non-financial factors also should be
taken into account before investing in to a new business.
Non-financial factors can influence the investment decision in that it can influence the
viability and success, as well as affect the financial analysis through the cash flows and the
discount rate of the project. The problem here is that problem is that there are many nonfinancial aspects that are not easily translated into monetary terms, because some factors are
difficult to estimate and produce evaluation errors easily. The difficulty in evaluating these
aspects is related to their intangible nature and measurement problems, which make this
analysis highly subjective. (Nuno Moutinho)
A few non-financial factors are:
Should consider whether they are receiving planning permission. If there is a delay in
planning permission then the project will get delayed.

The environment impact on the project must be considered. E.g. the construction of
the building can cause pollution, noise. It can abstract the view, the people mat
protest, may not be ethical to put up the organization, etc.
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The risk of failure must be considered.

Should be able and willing to meet the requirements of current and future legislation
Should be competitive and should be matching industry standards and good practice.
Changes in customer taste and preferences.
So, what I feel is that it is always good to consider the nonfinancial factors together with the
financial factors, and go for the new investment.
References
http://mobile-cuisine.com/business/developing-a-swot-analysis-for-your-mobile-foodbusiness. (n.d.). Retrieved 03 15, 2014, from http://mobile-cuisine.com/business/developinga-swot-analysis-for-your-mobile-food-business
http://www.dineshbakshi.com/mind-maps. (n.d.). Mind maps. Retrieved 03 18, 2014, from
http://www.google.lk/imgres?
newwindow=1&sa=X&rlz=1C2CHMO_enLK557LK557&biw=1366&bih=667&tbm=isch&t
bnid=rzHtq2wyc3Rc3M%3A&imgrefurl=http%3A%2F%2Fwww.dineshbakshi.com
%2Fmind-maps&docid=nveLxhYu9Mf22M&imgurl=http%3A%2F
%2Fwww.dineshbakshi.com%2Fphocadownload%2
Nuno Moutinho. (n.d.). fma.org. Retrieved 03 20, 2014, from
http://www.fma.org/Porto/Papers/PROJECT_EVALUATION.pdf
wikipedia. (n.d.). Retrieved from wikipedia:
http://en.wikipedia.org/wiki/Environmental_scanning
wikipedia. (n.d.). Retrieved from http://en.wikipedia.org/wiki/Financial_statement
wikipedia. (n.d.).
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Managing Financial Resources and Decisions

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Project Proposal

MODERN CLASS TAILORING