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FINANCIAL STUDY - Coggle Diagram

- - - - Author Gabriel Baca Urbina explains that:
        “The initial investment includes the acquisition of all fixed or tangible and deferred or intangible assets necessary to start the operations of the company, with the exception of working capital.
        A tangible asset (that can be touched) or fixed is understood to be the property owned by the company, such as land, buildings, machinery, equipment, furniture, transport vehicles, tools and others. It is called "" fixed "" because the company cannot easily dispose of it without causing problems to its productive activities (unlike current assets).
        An intangible asset is understood to be the set of assets owned by the company necessary for its operation, and which include: patents for invention, trademarks, commercial or industrial designs, commercial names, technical assistance or technology transfer, pre-operating and installation expenses and start-up, service contracts (such as electricity, telephone, fax, water, three-phase current and notarial services), studies that tend to improve the operation of the company in the present or in the future, such as administrative or engineering studies, studies evaluation, training of personnel inside and outside the company, and so on.
        
        In the case of the cost of the land, this must include the purchase price of the lot, the commissions to agents, notary fees and expenses, and even the cost of demolishing existing structures that are not needed for the purposes that the land is intended to give. . In the case of the cost of equipment and machinery, it must be verified if this includes freight, installation and start-up.
        In project evaluation it is customary to present the list of all tangible and intangible assets, noting what is included in each one of them ”.
        
        In investments, all the resources necessary for the execution of the project in the established time are quantified in monetary values, and two cases can occur:
        1.- EXTENSION OF FACILITIES.
        When you have an installed and operating plant, and you want to increase production capacity with the inclusion of machines with the same specifications, with the same or greater production capacity.
        2.- NEW PROJECT.
        Fixed Investments.
        Fixed investments have been made up of assets that are not subject to transactions, are obtained during the implementation or execution stage, and are used during the life cycle of the project.
        Working Capital.
        Working capital or operating capital is achieved by subtracting current liabilities from current assets of a going concern.
        The working capital changes according to the type of project to be executed, becoming one of the most important points in the financial situation of the company. As long as a company does not achieve that its income is greater than its expenses, it will always need working capital.
        Investment Schedule.
        Every project must present an execution schedule indicating the disbursements and the dates on which they will be made.
        
        The final balance of the month becomes the beginning balance of the following month, and must be placed in the box corresponding to the "previous balance" of the following month. If the financial resources are not enough to meet the investment needs of the minimum size plant, it is clear that the project is impossible.
        Similarly, if your own financial resources and those of others allow you to choose between several sizes for which there is a large difference in costs and economic performance for similar productions, it will be advisable to select the size that can be financed more comfortably and safely, and that while offering, where possible, the lowest costs and high return on capital.
        -Of course, it will be necessary to make a balance between all the mentioned factors to make a good choice.
        -For the aforementioned, the purpose of the financing study is to determine the way to attract financial resources in order to allocate them to the investment that is analyzed in the project.
- - - - The following can be detailed within this heading:
        • Raw Material or Direct Materials: is what is part of the product, such as in a shoe, the sole that composes it, as well as the strap and the leather, as well as other materials that it carries internally and that are necessary for its elaboration. Indirect materials are those that do not constitute part of the product for its operation, such as bags and boxes that are used to give presentation to the packaging.
        • Labor: it is divided into direct and indirect labor. Direct labor is that which performs physical work, also actively participates in the elaboration of the product, for example: bonding of bricks, drilling of material, assembly, etc. Indirect labor is made up of supervisors, guards, secretaries, administrative assistants, maintenance personnel, etc.
        • Other manufacturing expenses: here you can include expenses such as cleaning supplies, office stationery, fuel and lubricants, spare parts and accessories, water and energy, rent, insurance, taxes, depreciation, maintenance, and others.
      - 2) Selling Expenses.
        They are those that are used to boost the sales of the company and are made up of advertising, propaganda, salaries and commissions of sellers, shipments and delivery of merchandise, transportation, etc.
        3) Administration Expenses.
        These expenses are made up of the expenses for the administration of the company. In this category are the salaries of administrative personnel, depreciation of office equipment, payments for rent, electricity, telephone, mail, telegraph, cleaning expenses, stationery and stationery.
        4) Financial Expense.
        These expenses refer to the operations carried out in order to stimulate the activities of the company.
        
        PRESENTATION OF THE COST BUDGET.
        The cost budget is presented in the form of accounting and financial results. It is prepared considering in detail all the items studied, and the basic scheme.
- - - - In the case of the previous table, with a discount rate of approximately 19%, the result is a positive NPV, therefore the execution of the project is accepted.
        In year zero (0) the initial investment appears, and from year 1 the flows turned out to be positive, then the sum of all flows is subtracted from the initial investment of $ 12,845.4 because it is a disbursement, which provides a final positive value .