* Investment projects for new businesses
* Investment projects for companies operating
* Market research
* Technical Study
The aim of this study provides market indicators, technical and financial to be considered by decision makers or operating new businesses, who are interested in investing their money in profitable projects in the service of society and willing to produce and create jobs satisfiers .
Investment projects in productive enterprises can generate jobs through the acquisition of machinery, labor and raw material to be processed into the creation of new products or services that can meet the needs of other businesses or consumers. Investment projects can be channeled to the creation of new businesses or expanding businesses that are working.
Each project is expected to be profitable but there are differences between the expectations placed for a new company and for operating. A company will need to seek new customers before opening its doors to ensure the purchase of their products to be manufactured. If your products demand will have no sense making them.
. In the case of a joint operation demand, in some cases already exists, and can propose new investments for the following reasons:
* Its current capacity is insufficient to meet market demand.
* Need to launch a new product that customers are demanding.
* Need to improve quality or reduce costs and only possible with new machinery.
* You need to build buildings or infrastructure.
* Wait enter new markets with the current product.
* Is interested in taking advantage of their waste to make new projects.
* Must meet environmental standards
The company faces customer demand for greater volume, with a new product, retail price or innovate the existing. In this situation the company must respond by expanding or modifying its installed capacity and meet customer expectations.
Investment projects are evident in the balance sheet assets when performed by moving the assets of a set amount before the project to a larger amount thereafter.
Any positive change, negative zero or less than depreciation and amortization to total assets implies an investment. It invests at least an amount equal to the depreciation and amortization of assets avoiding them to degrade. The origin of the resources invested can come from borrowed funds (liabilities) and equity (capital).
There may be investments exclusively working capital, where their presence is represented by higher cash balances, checking account, accounts receivable, inventories, notes receivable and accounts represented by some liquid capital that grows naturally by the increase in operations and to solve unforeseen.
However, when these investments are accompanied by purchases of long-term assets such as land, transport equipment, machinery and office equipment, and aims to move the volume of production require a planning process, to ensure their recovery margins acceptable profit.
All investment projects must be evaluated according to their performance however, the procedure is different for new and operating companies.p align = “center”>
* Investment projects for new businesses to be assessed through the present value or the IRR (internal rate of return) of the cash flows generated by the project during its lifetime.
* The operating companies require a more complex procedure in measuring the profitability of their investments which include:
* Evaluation of the activity of the company assuming the project.
Measuring the marginal return on investment that is obtained by subtracting the previous evaluations together (Hernandez, Hernandez VA, 1998)
Investment projects for new companies:
Project evaluation for new companies should begin with the market research that allows us to determine the product to be sold, branding, packaging, label, product design, color, quality, warranty, liability, labels warning and servicing. (Stanton, J.W. Etzel, J. M., Walter, J: B;, 1996). Who are the potential customers needs and economic capacity to purchase our product, and the characteristics of the demand elasticity for evaluating consumer response to price changes. (Ferguson, C.E., 1971).
It should identify the companies that currently serve the needs of my potential clients. The price at which your product offer on I will make my strategies with services or standardized or differentiated products. (Amat, J.M. 2000). Distribution channels to distribute the product from, wholesalers, distributors., Retailers, direct selling from house to house, etc. The market share by determining the volume of sales achieved in the market for companies that currently offer their product, sales and participation that can be achieved with our product. Finally, the sales volume calculated from the unsatisfied demand and the elasticity of demand and I can provide the necessary sacrifice in price to enter the market.
The technical study is the second study should be performed to determine if the product you want to sell can be manufactured in compliance with customer expectations on price and quality, if we have the possibility of taking the consumer at competitive prices and in the quantity required. To build it we need to know the following: investment in machinery, building, transportation equipment, furniture, services. The availability of raw material in the required quantities and delivery opportunity. Auxiliary materials and services that enable the production process The labor required to produce the product, the type of process to be used (depending on the volume of production and standardization), the manufacturing process of the product distribution facilities to produce more efficiently, product design, inventory management, location of facilities and quality control (Chase, R., Jacobs, R., Aquilano N. (2005),
The financial study aims to measure the value of money over time. If weight is invested today in the future we have enough to purchase a larger quantity of goods to which we acquired today for that money. This involves recovering the loss of purchasing power of that weight gain over time in terms of risk to recover. In the absence of profits, the project should be discarded as meaningless job risk and the employer if no benefits that grow the investment. To determine the profitability of a new project requires calculating the investment to be made at the beginning. This investment includes fixed assets acquired for new business: machinery, land, buildings, furniture, transportation equipment, plus the working capital necessary for the company to operate at least two months with their own resources. From this date it is expected that the sale of merchandise restore the availability of cash to continue operations (Grabinsky, S. 1992).
With sales volume is expected to reach revenues shall be determined by annual sales of the product, the cost of raw materials, labor, manufacturing overhead and operating expenses for the entire life of the project. The total annual income must deduct the cost of raw materials, labor, manufacturing overhead, operating expenses, income taxes and employees’ profit. The result will be annual profits for the year. Under the asset depreciation and amortization are not paid at the time they apply to annual costs and expenses, and appear only for tax purposes must be added back to net income for cash flow during project life. Facing the sum of the discounted cash flows at a minimum expected rate of return to the initial investment will determine whether the investment is profitable or not, sufficient investment decisions.
The legal study is of considerable importance because neglect can lead to severe headaches administration endangering the future of the fledgling company. This study considers the obligations to be met by the new company or in operation, obtaining federal taxpayer registration, operating authority for the Secretary of State to regulate the activities of our company, meet the rights of workers to avoid unnecessary penalties , have safety rules to avoid accidents and timely pay tax obligations.
Finally administrative studies will be needed to facilitate the organization and operation of the company delegating responsibilities to streamline its functions and activities aimed at achieving goals (Hernandez, Hernandez VA, 1998)
BUSINESS INVESTMENT PROJECTS IN OPERATION
Companies operating mainly investment projects carried out by any of the following reasons:
* Its current capacity is insufficient to meet market demand.
* They need to launch a new product that customers are demanding.
* Need to improve the quality of their products or lower costs and only possible with new machinery.
* They need to build buildings or infrastructure to expand facilities and improve service.
* They expect to enter new markets with the current product.
* Replace obsolete assets.
* Harnessing waste into new projects.
* Comply with environmental standards.
Whether the investment is made with equity (capital) or others (liabilities), evidence of such investments will be reflected in the balance sheet of the company.
The balance sheet of companies that do not invest reflects a progressive deterioration of fixed assets as a result of depreciation, however, this is not bad if you keep the pace of sales and the profit margin per dollar invested in capital. The increase in current assets is healthy only if it helps to increase the return on capital with a considerable increase in sales. Its origin is an increase in accounts receivable keeping money in the street with high financial costs for the company. In the same case, an increase in inventories will result in a decrease in turnover of goods and the corresponding impact on the return on capital.
The acquisition of assets generally require previous studies, but the time to make the decisions depend on market conditions:
If the company has liquidity or funding sources available and the potential sales opportunity is in sight, the time to decide to do will be short, and that opportunities to exploit gaps in the market and not many decisions to be taken immediately.
When companies have problems to open spaces in the market and grow must risk investments that provide them access to options with a high probability of being profitable in the future, in such cases the decision makers should think through strategies to follow to minimize the risk your money.
It should also consider the time required to evaluate investments and expectations for the future, as demand may be temporary and very high investment and slow to realize this in the construction of tourist hotels or expensive investments in short-term achievable but difficult to recover from instability of demand in the transport of passengers and general cargo.
Operating companies to make decisions on expansion of markets should ensure that the marginal product will produce is sold. Not the same sell ten thousand units to sell twenty thousand, it is necessary to decide who to sell, where to sell, how to sell and who to sell also ensure that the ten thousand additional units will be sold, otherwise the expansion will a failure or a white elephant that will generate an impressive load in costs for operating the products the company sells today.
It will take time to investigate the possibilities of success with new products and ensure sales before accepting new projects. It is convenient to be risky when the odds are in favor or a high chance of success. Otherwise, without a previous analysis, it would be unwise to invest with a high probability of failure (Mintzberg, M. (2000) ..
If it is intended to increase sales of the product in the current market and the company knows the competition, product price, quality, payment facilities, financial viability of its competitors, timely delivery, image, customer service, leads to purchasing power, demand elasticity and customer loyalty to brands. Although this market is the safest, is offering less likely to grow with the same product, since being served by our company from the competition and the competitive advantages are marginal (see Figure No. 1)
If you plan to enter new markets will be important to note whether they are domestic or foreign, what are the chances of success especially in the differential sales prices and costs of product placement in the selected market. .
Obviously a new market with products that we produce and sell in other markets may be attractive if it represents expansion in sales to new customers and competitors (VF Martinez, 1990).
Figure # 1
RISK AND UNCERTAINTY IN PRODUCTS AND
MERCADOSACTUALES AND NEW
Identify companies that currently serve the needs of my potential clients. The price at which your product offer on I will make my strategies with services or standardized or differentiated products. (Amat, J.M. 2000). Distribution channels to distribute the product from, wholesalers, distributors., Retailers, direct selling from house to house, etc. The market share that can be achieved by determining the turnover of competition that currently offers its product.
Finally, we must identify the sales volume calculated from the unsatisfied demand and the elasticity of demand we can offer, considering the necessary sacrifice in price to enter the market.
Work the product already placed on the market creates uncertainty, however, the risk of loss is limited, while launching a new product in a market either current or new high-risk accounts. The investment, design, product manufacturing, advertising and marketing, new disbursements represent that require financial support to penetrate and hold the product in the market ..
Among the few advantages that can be achieved is to produce a new product with current technology saving part of the investment in plant and machinery, however, the cost of placing the product on the market, the marketing and personnel training in the new Product line will be budgeted expenses.
New investments represent growth and planning for what will be necessary to form a responsibility center investment plan that addresses the steps from investment planning, the organization responsible decision makers, implementation of programs and evaluation mechanisms and control of the investment process. (Amat, JM, 2000).
In the expansion of facilities or building new plants, purchase of machinery, raw materials, auxiliary materials, products, personnel recruitment and training should be established defining the following:
The project scope that defines what is included and not included in the project (Gaither N., G. Frazier, 2000)
Set the time for the completion of the project with Gantt charts, critical path, PERT, network diagrams and events.
The budgeted cost for the project
The commitment to quality established to meet the relevant standards and how to satisfy them (Roy, KR, 2001),
Human Resources. Integrated internal and external partners in the project
The flow of communication with permanent reports on progress and budget tracking.
Assess the risks, threats and opportunities of the project through to applied probability scenarios.
Create recruitment strategies, quotations, tenders and contracts for the supply of materials and methods to minimize costs with MRP, JIT inventory enabling lower costs and inventory processes (M. Velasquez, 2000).
Achieve integration of teamwork of all areas involved.
Establish quality standards using the PDCA method and ISO 9001:2000.
Unlike the new projects that generate cash flows only on which one can measure the return on investment, operational projects require a different form of measurement.
First: Calculate the cash flows of the company for the duration of the project marginal operating before this takes place in the form as shown in Table No. 1.
Should be considered, depending on the marginal life of the project, calculate cash flows by the number of years expected to render in operation. The sample handling 8. A reasonable period which may be fixed in the income tax law for each type of asset.
Unlike a standard income statement, cash flow added to the end of the following accounts:
The depreciation of assets. The amount of this account is subtracted from sales as an expense, however not a disbursement therefore turns to add to earnings after tax.
At the beginning of the evaluation process as year zero (0) and profit after discounting the total assets of the investment company as to its operation.
As the disbursement of assets is impaired by the presence of unpaid liabilities, the latter will join the company flows.
The future payment of the debts and liabilities (debt reduction) will be deducted in subsequent years as appropriate.
Finally, to complete the cash flows must be added to the last year, the salvage value or disposal of assets that have reached the end of its useful life.
Second: Calculate the cash flows of the company including the marginal investment project by the lifetime marginal project.
Unable to manage cash flows of a marginal project in isolation, as it is expected to contribute to the other activities of the company and simultaneously serve as external economies of the company.
Such is the case of marginal projects to harness waste useful as feedstock in other processes, which normally disappear them represents a cost, however, can be another source of income if treated properly.
The accounts of table 2 are similar to those shown in Table No. 1, however, the amounts include what is expected to happen with marginal investment and the profits generated by it.
Third: Subtract the estimated cash flows to the project cash flows calculated without the project. The result will be the cash flows generated only marginal additional investment by the company as shown in table 3.
Value of Money over time
To assess whether a project is profitable is necessary to consider that is not the same weight today disburse one next week, next month or next year. Factors such as inflation, deteriorating purchasing power or simply being willing to defer present expenditures for future spending I generate the same or greater satisfaction.
Consider consumer response to qualitative variables can generate multiple answers, but we can agree to postpone consumption and is priced for any investment, not enjoying our money today has a price, which can be represented by expected rate of return and the internal rate of return, or failing that, a minimum expected rate I can tell if it’s worth doing or not the project.
After applying a minimum expected discount rate (r) to the marginal cash flows calculated in table 3 and summed as shown in the formula below VPN, you can make the decision to invest or cancel Project. (Schroeder, R.G, 1992).
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