Page 141 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes Project Appraisal

The evaluation of industrial projects in terms of alternative variants in technology, raw materials,
production capacity and location of plant is known as ‘Project Appraisal’.

Financial Appraisal

Financial appraisal involves assessing the feasibility of a new proposal for setting up a new
project or the expansion of existing production facilities. Financial appraisal is undertaken
through an analysis which takes into account the financial features of a project, including sources
of finance. Financial analysis helps to trace the smooth operation of the project over its entire
life cycle.

Technical Appraisal

Technical appraisal is primarily concerned with the project concept in terms of technology,
design, scope and content of the plant, as well as inputs are infrastructure facilities envisaged for
the project. Basically, the project should be able to deliver a marketable product from the
resources deployed, at a cost which would leave a margin that would be adequate to service the
investment, and also plough back a reasonable amount into the project to enable the enterprise
to consolidate its positions.

Economic Appraisal

Economic appraisal of a project deals with the impact of the project on economic aggregates.
These may be classified under two broad categories. The first deals with the effect of the project
on employment and foreign exchange, and the second deals with the impact of the project on net
social benefits or welfare.

Self Assessment

Fill in the blanks:
12. Venture capital is the ……………. financing for high-risk and high-reward projects.

13. Foreign currency finance is the fund provided for …………….. trade transactions.

8.4 Treasury Management

Treasury management can be described as the management of cash, funds, currency, bank and
financial risk. That’s why it is an imperative tool of finance. Cash inflows and outflows are
checked by finance manager. The finance manager makes the list of all receivable amounts
which will increase the treasure house of the company. He also keeps a track record of the dates
in which he has to receive the fund from debtors. Under this management, he estimates all
financial risk for the investment of cash. All investment is done on the basis of investment
policy. Many organizations have separate treasury department. If company deals with foreign
currency, then management of foreign currency risk is the duty of treasury department. Suppose,
Google Inc. USA Company which is a MNC and it receives the fund from advertisers and shares
with ad-sense publisher. A good treasury officer can give the advice to Google Inc. about when
company should pay the bill of ad-sense publishers.

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