PROJECT

CLASSIFICATION,
IDENTIFICATION &
PROCESS
 MEANING OF PROJECT

 Project is also known as Capital Investment or Capital

Expenditure or Capital Project.

 Capital Expenditure, from accounting point of view is an

expenditure which is shown as an asset in the balance
sheet.

 This asset, except in case of non depreciable asset like land

is depreciated over its life.
 SITUATIONS INVOLVING CAPITAL
EXPENDITURE DECISIONS

 Insurance Company planning to install a computer

system for information processing.

 A graduate student planning to buy a bike.

 IMPORTANCE OF
CAPITAL EXPENDITURE

 Long term Effect

 Irreversibility

 Substantial Outlay
 DIFFICULTIES IN
CAPITAL EXPENDITURE

 Measurement Problem

 Uncertainty

 Temporal Spread
CLASSIFICATION OF PROJECT
or CAPITAL INVESTMENT
 Physical Asset
 Monetary Asset
 Intangible Asset
 Strategic Investment
 Tactical Investment
 Mandatory Investment
 Replacement Investment
 Expansion Investment
 Diversification Investment
 R&D Investment
 PROJECT IDENTIFICATION

 For establishing a successful venture, the search

for promising project idea is the first step.
 Key to success lies in getting into right business at
right time.
 For identifying opportunities in business, it
requires:
1) Imaginative
2) Sensitivity
3) Environment Changes
4) Realistic Assessment
 FEASIBILITY STUDY FOR
PROJECT IDENTIFICATION
 Generation of Ideas
 Initial Screening
 Is the Idea Promising?
 If Yes, plan feasibility analysis and If No, Terminate it.
 Conduct Market Analysis
 Conduct Technical Analysis
 Conduct Financial Analysis
 Conduct Economic & Ecological Analysis
 Is Project Worthwhile?
 If Yes, prepare funding proposal and If No, Terminate it.
 PROCESS INVOLVED IN
PROJECT IDENTIFICATION
 Generation of Ideas:
Ideas with the help of which product or services made have better quality and
low price.

 Monitoring the business environment:

1) Economic Sector
2) Government Sector
3) Technological Sector
4) Competition Sector
5) Supplier Sector
 Cont…

 Corporate Appraisal:
Corporate strengths & weaknesses are essential for
identifying investment opportunity which can be
profitable.

 Profit Potential of Industries / Michael Porter Model:

1) Rivalry among existing firm
2) Threat of new entrants
3) Threat of substitute products
4) Bargaining power of buyers
5) Bargaining power of suppliers
 Cont…
 Scouting for Project Ideas :
 Project ideas are key to success. So proper analysis, examine,
review, investigation of industry should be done.
 Trade fairs can also be attended to get new ideas.

 Preliminary Screening : It involves

1) Availability of inputs
2) Adequacy of market
3) Cost
4) Risk level
5) Government policies
Cont…

 Project Rating Index :

All the proposals are given rating on rating scale.

 Selection of best appropriate project :

Project that gets the highest rank is selected.
I AM NOT EXPECTING
ANY QUERY !!!!!!!!!
Thank
You