Financial viability assessment is a critical component of business case development, focusing on evaluating whether a proposed project, investment, or venture is financially feasible and sustainable over time. This assessment involves a comprehensive analysis of various financial metrics and elements, such as projected revenue streams, cost structures, cash flow forecasts, profit margins, and the overall return on investment (ROI).
The aim is to determine whether the expected financial returns justify the investment and if the project can maintain financial stability throughout its life cycle. This analysis helps in identifying potential financial risks and uncertainties, assessing the likelihood of achieving projected financial outcomes, and making informed decisions about proceeding with the project.
In conducting a financial viability assessment, several key factors are taken into consideration. These include the initial capital requirements, operating costs, funding sources, and revenue generation models. It also involves a thorough examination of market conditions, competitive landscape, and economic trends that could impact the financial performance of the project. Sensitivity analysis is often employed to understand how changes in key assumptions affect the financial viability. This robust assessment ensures that the business case is grounded in realistic financial projections, thereby minimizing the risk of financial underperformance or failure.
Ultimately, the financial viability assessment is essential for ensuring that the project contributes positively to the organization's financial health and strategic objectives.
To learn, check-out our Financial Analysis Templates.
The financial templates should include a discounted cash flow model ("DCF model") to value the business case by forecasting its' cash flows and discounting the cash flows to arrive at the current, present value.
The templates calculate the discounted cash flow for determining:
- Return on investment (ROI)
- Operating, investing & financing cash flows
- Net present value
- Internal rate of return
- Payback period
- Profit-to-investment ratio
The financial templates should include a business case financial analysis summary dashboard with the scenario and sensitivity analysis for evaluating the financial viability assessment implications and increasing the return on investment.
