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Financial analysis of project proposals

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How does an organization conduct financial analysis of project proposals?

What are the strengths and weaknesses of its approach?

What would you change if you had the power to do so (and why)?

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Solution Preview

First, there are several types of project proposals with varying approaches, although the basic premise of profit (or minimization of cost) is always involved.

Some of the proposals might include: plans for expansion, acquisition, disposal, segment sale, product change, marketing changes, financing changes, major equipment purchases, bidding on contracts, joint venture activity, change in legal form, issuance of stock, etc.

Most major changes or acquisitions or activities within a company involve financial analysis of an idea. It is planning that is essential to the growth and profitability of an organization. Maybe in the past, if something smelled like a good idea, it was acted on immediately. In today's world of competitiveness, global intervention and communication speed, it isn't as easy.

Let's expand with two examples. A company is bidding on a job. It could be an IT contract, or a job to build a bridge. ...

Solution Summary

The 600-word solution first discusses the general concept of evaluating proposals. Following are several comprehensive examples of the processes that might be used to reach a conclusion for management to consider.