Investment analysis - the method of making the right decisions in business

Investment analysis is an investment property research tool that determines the conformity of such property to the specific needs of each investor.

Investment analysis includes an analysis of indicators that characterize the possible consequences of capital investments, as well as factors that affect the effectiveness of these investments. Also, during the analysis, the risks, forms, conditions and methods of financing are assessed.

The analysis of investment activity is carried out in several stages:

1. Drawing up a list of investments. At this stage, all possible options for investment activity are considered, taking into account consideration of possible replacement for new and modern equipment during investment.
2. The subsequent analysis is carried out to form the forecast of cash flows for the future. At the same time, investment analysis should take into account only those cash flows, as a result of which positive changes in income after taxation are expected from the investor. All incomes and expenses that remain unchanged both before and after the implementation of the project are not considered. All investments for the expansion of the enterprise can be carried out from such sources: own, free funds, leasing and a loan. When forecasting cash flows, external regulators such as taxes (for example, VAT, income tax), inflation and the CBR rate are used.
3. The forecast of data for the calculation of barrier rates is not needed at all if the company operates in a country with a stable economic situation, manifested by low inflation and the stability of legislation. Otherwise, the calculation of this forecast is carried out taking into account such indicators as the average weighted cost of capital, the level of inflation and all sorts of financial risks.
4. The forecast of reinvestment activity is carried out using the method of trend extrapolation.
5. When calculating the net cash flow for each subsequent period, if you use your own funds or borrowed funds when investing, you need to calculate the depreciation.
6. When carrying out the analysis of investment activities, it is advisable to use indicators of a high degree of reliability (barrier rate and the degree of reinvestment). Only in this case, the indicator, such as MIRR, accurately describes the profitability or effectiveness of this project. Otherwise - IRR. If there is only a barrier rate, there is a DPI.
7. The evaluation of the quality indicators of investment investments provides for an analysis of the sensitivity of certain criteria to changes in such influential factors as the level of interest rates, the rate of inflation, the life cycle of the project, the frequency of income generation. This calculation will determine the significant risks for the adoption of appropriate investment decisions.
8. Analysis of solvency and liquidity allows you to get a fairly reliable forecast in this field of business entity.
9. Investment analysis for certain factors is mainly used to determine the impact of investments on the main indicators of the economic activity of the entity and is considered in the context of such indicators:

- obtaining additional products for one ruble of investment;

- the possibility of reducing the cost of finished products for a ruble investment;

- the payback period of the investment project at cost and profit.

Analysis of financial indicators in the implementation of investment projects will identify critical positions in the economic activities of the enterprise, help identify the causes of the problems and take certain correct decisions.