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Operational Evaluation

A method of estimating capital investment, which will be an article related to the composition of the oldest and most widely used even before the concept of discounted cash receipts and expenses become generally accepted as basic method of obtaining the true evaluation of the effectiveness of capital investments (in developing feasibility studies, business case, examination of investment projects). Despite this, due to the simplicity and illustrative, This method is widely applicable and used in nastoschy time mainly for the rapid assessment of investments in the early stages (in the examination of investment projects, economic feasibility, feasibility study projects). Rapid rate of return is calculated by dividing the average annual earnings (PN / 2) for the period of the project on the size of investment (IC), provided that at the end of the test project, all capital expenditure will be written off, and when tolerance of the residual value (RV), then its rating should be excluded. ARR = PN / 2 (IC – RV) interpretative value simple rates of return to estimate what proportion of capital payments to be returned in the form of profit within a range of budgeting. Comparing the estimated value of a simple rate of return with minimum or moderate level of projected profitability, the potential investor can come to a preliminary view of need to assess the investment (the examination of investment projects, economic feasibility, feasibility study). Field of the main disadvantages of operating profit rate for the examination of investment projects and economic feasibility or feasibility studies of projects): – ignoring the fact that the value of money over time – the ambiguity of the choice of initial values of profits and investment costs in terms of uneven distribution cash flows during the project period. The advantages of using this approximate method, which is a simple calculation of profit margins can only be justified in terms of ease of computation, and that predetermines the use of this indicator in practice, the simplicity of the calculation is the main and only advantage of this factor.

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