Ans 2.

Project Appraisal: The assessment of the viability of a project involving

medium or long-term investments in terms of shareholder wealth may be termed
as project appraisal. In our country the all-India level financial institutions have
devised an in house policy of assessing the industrial projects to grant financial
assistance based on their commercial, technical, economic and financial viability.
The various aspects of Project Appraisal are:
1.
2.
3.
4.
5.
6.
7.

Basic Eligibility for Financial Assistance

Market Appraisal
Technical Appraisal
Financial Appraisal
Economic Appraisal
Entrepreneur/Promoter Appraisal
Management/Organization Appraisal

1. Basic Eligibility for Financial Assistance

Constitution of Firm/Company
Priority/Government Policy
Institutional Policy Decisions
Acceptability of the Promoters by the Financial Institutions.

2. Market Appraisal
Assessment of Potential Demand (Demand-Supply Gap).
Study on Trends of Production, Supply, Imports, Exports, Price Trends,
Distribution and Sales Promotion, Government Policies, Competition,
Consumer Profile, etc.
Methods of Demand Forecasting viz. Trend Projection, End Use,
Econometric Methods.
Problems in Demand Forecasting in Collection of Data, Methods of
Forecasting and Environmental Changes.
3. Technical Appraisal

Location ad Site
Plant Capacity and Product-Mix
Technology and Technical Know-how
Selection and Procurement of Plant and Machinery
Civil and Structural Work

 Charts and Lay-Outs

Raw Materials, Consumables and Utilities
Implementation Schedule
4. Financial Appraisal

Estimation of Cost of Project

Means of Financing
Profitability Projections and Assumptions thereof
Cash Flow and Balance Sheet Projections
Ratio Analysis
Analysis of Past Working Results, Financial Position and Sources and
Application of Funds

5. Economic Appraisal

Cost-Benefit Analysis
Domestic Resource Cost
Effective Rate of Protection
Employment Potential
Productivity and Investment per Worker

6. Entrepreneur/Promoter Appraisal
Background, Qualifications and Experience
Financial Resourcefulness
Managerial Competence, Past Track Record
Institutions/Banks
7. Management/Organization Appraisal

Management Set-Up
Organizational Set-Up
Recruitment and Selection of Executives
Training

and

Dealings

with