Types of investments and the basis of their analysis. Methods for analyzing investment projects

Every investment decision is based on:

Assessing the company's own financial condition and the feasibility of the company's participation in investment activity;

Assessing the volume of investments and their sources of financing;

Estimating future returns from investments.

The information base for making a decision on the inclusion of a project in the investment portfolio, before the start of its investment, and of course, continuous monitoring of implementation is provided by investment analysis. It is an integral part of the investment management process.

Investment analysis is a set of methodological and practical techniques and methods for developing, substantiating and evaluating the feasibility of making investments in order to make an effective decision by the investor.

The methods and techniques of investment analysis are the means for in-depth study of phenomena and processes in the investment sphere, as well as the formulation of conclusions and recommendations on this basis. The procedure and applied methods of such an analysis are aimed at putting forward alternative options for solving design and investment problems, identifying the extent of uncertainty for each of them and their real comparison according to various performance criteria.

Only an insignificant share of investments does not give the expected and planned result for reasons beyond the control of the investor. Most of the projects that turned out to be unprofitable, could not be allowed for implementation, subject to high-quality investment analysis. Thus, investment analysis helps to improve the efficiency of investment management.

It must be borne in mind that investment analysis is a dynamic process that occurs in two planes - temporal and subject. In the time plane, work is carried out that ensures the process of development of investment projects, from the emergence of the idea itself to their completion. In the subject plane, the analysis and development of investment decisions in various meaningful aspects is mainly carried out. These aspects include the economic environment, correctly set goals and objectives of investment, marketing, production, financial and organizational plans of the investor, the technical basis of the investment project, its social significance, environmental safety, financial viability of the project, organization of project management, investment risk analysis, and general sensitivity project to change certain significant factors, as well as the adequacy of performance indicators, assessment of the capabilities of project participants, business and personal qualities of its managers. The listed aspects should be developed in the process of preparing and developing an investment project, considered during its analysis, taken into account when making a decision on investment, and also controlled during the implementation of the project until its completion or termination.

The subject of investment analysis is causal connections of economic processes and phenomena in investment activity, as well as its socio-economic efficiency. Their study allows us to give the correct assessment of the results achieved, identify reserves improve production efficiency, justify business plans and investment decisions.

The object of investment analysis is the financial and economic activity of enterprises in the context of the relationship with the technical, organizational, social and other conditions of investment activity.

Subjects of investment analysis

The subjects of investment analysis are users of analytical information, directly or indirectly interested in the results and achievements of investment activities. First of all, these include owners, management, personnel, suppliers, buyers, creditors, the state (represented by tax, statistical and other authorities that analyze information from the point of view of their interests to make investment decisions). In particular, for owners interested in the stability and growth of dividends on invested capital, the priority areas of analysis are the return on capital and the financial stability of the enterprise, and therefore the object of investment analysis for them, first of all, is the impact of investment projects on the financial condition of the enterprise and financial results from their implementation. Suppliers and buyers carry out investment analysis in order to determine the ability of the enterprise to fulfill its contractual obligations from the standpoint of assessing the predictive change in its financial condition as a result of investment activities. The object of investment analysis for creditors of the enterprise is the liquidity of its balance sheet, solvency and creditworthiness. The personnel of the enterprise, despite the interest in increasing wages, other forms of incentives and social benefits, analyzes mainly predictive changes in financial results. The priority object of investment analysis for representatives of the state, in particular, tax authorities, through their interest in maximizing and timely receipt of taxes and fees, are financial results. Only the management of the enterprise carries out a comprehensive assessment of the effectiveness of investment activities in order to obtain complete reliable information that is objectively necessary for making optimal investment decisions.

The purpose of investment analysis is to determine the value of investments, that is, the effect, the result of their implementation, which in the general case is the difference between the change in the benefits received from investing in the implementation of certain investment projects, and the change in the total costs that are carried out within the framework of these projects.

The main functions of investment analysis are:

Develop an orderly collection structure data that would ensure effective coordination of activities in the implementation of investment projects;

Optimization of the decision-making process based on the analysis of alternative options, prioritization of activities and selection of technologies that are optimal for investment;

A clear definition of organizational, financial, technological, social and environmental problems, arising at various stages of the implementation of investment projects;

Promoting competent decision making on the expediency of using investment resources.

With all other favorable characteristics investment project, it will not be accepted for implementation if it does not provide:

Reimbursement of invested funds;

Getting a profit that ensures a return on investment not lower than the level desired by the investor;

Payback of financial investments within a certain period acceptable to the investor.

Definition of reality and methods of achievement precisely such results of investment activity, and is a key task of investment analysis.

For every solid corporation, the main goal will always be to increase income through capital investment. Before proceeding with the investment, management needs to determine the financial base of the company, the amount of possible investments, as well as the economic feasibility of participating in the proposed project. Therefore, it is very important to correctly use the collected information and further analyze investment projects to monitor and control the investment management process. This is the only way to achieve a high return on investment.

What is investment analysis

To make it easier to understand the intricacies of investing, you must first know the basic definition.

So, the complex application of methods and techniques for assessing the economic feasibility of financing any projects that investors rely on to make the right decision is called investment analysis.

The process of such an analysis is always dynamic and has two directions: subject and temporal. The subject carries out analysis in order to determine the basic investment decisions, taking into account various factors.

These factors include:

• economic environment;
• goals and objectives set for investment;
• environmental Safety;
• the significance and impact of the project on the social infrastructure of the region;
• determining the presence of financial risks;
• investors' plans for financing, organization, marketing, etc.

The above aspects are worked out during the preparation of the project itself, and then, during the analysis, they are taken into account for decision-making and corrective actions.

In the temporary direction, work is considered that starts from the moment the idea arises and lasts throughout the life of the project, because it ensures its continuous development, so that upon its completion, investors receive a profit not lower than the expected level.

Functions

The main functions of investment analysis are:

1. Creation of an authorized organization that will collect information and coordinate the process of implementing the goals of the investment project.
2. In order to make a choice of the most suitable investment systems, the organization makes a decision based on preliminary analyzes, taking into account alternative options, and determines the sequence of necessary activities.
3. Timely identification and resolution of technology, financing, environmental or social issues that may arise during the implementation of the project.

Tasks

The analysis of investment activity is aimed at finding solutions to the following problems:

• a comprehensive assessment of the necessary conditions for investment;
• justification of prices for the necessary activities and the choice of a source of financing;
• precise definition of external and internal objective and subjective aspects that may lead to negative changes in the results of investment;
• comparison of losses acceptable to investors from possible risks with expected returns;
• mandatory final monitoring of the project to introduce measures that improve the results of further investment.

Goals

The investment analysis of an enterprise aims to accurately find the possible result from the implementation of investment projects with the obligatory compilation of a list of all expenses that formed the project. After all, they play a key role in the formation of value.

Investment analysis methods

Now we need to consider in detail how exactly investors increase their capital.

An analysis of investment attractiveness is necessary for corporate leaders to provide reliable information about the objects in which they plan to invest. Since there are so many ways to host these events, it's best to consider each option in detail according to their popularity and frequency of use.

If a corporation wants to acquire shares in other companies, then the following investment analysis methods will be used:

1. The replacement cost analysis takes into account the capital construction of a facility from scratch at current prices, but discounts (most often 10-20%) from the cost of a new one are applied to estimate the cost of the current enterprise.
2. Relative analysis of the acquisition transaction, when one corporation buys another company, this takes into account book value assets and stock prices.
3. Comparative analysis of companies - the process of comparing the economic performance of one company with similar enterprises.
4. Discount cash flow analysis is a company valuation procedure that determines the estimated income from the acquisition of securities that confirm ownership of a part of the company.

Retrospective analysis

This type of analysis can be used when past data on price fluctuations have already been analyzed in order to determine the causes of fluctuations and their consequences for the performance of an investment project.

Valuation of shareholdings

Sometimes a situation arises that the shares of the company that the corporation is going to take over are not traded on the stock exchange. Then they perform a financial investment analysis, or rather, use the information from the reports of the accounting department of the company of interest and, if possible, the reports from the accounting department of firms in the same industry, but so that their shares are quoted on the stock market. The indicators of stock quotes of the above-mentioned companies are necessarily taken into account.

Factor analysis

To cope with the tasks and achieve the right solution, experts use mathematical algorithms in combination with logical thinking and intuition. To make it convenient to conduct an investment analysis of an enterprise and to more easily assess the risks to the value of an investment project, managers compile a questionnaire that has a universal form.

After careful processing of the information received and solving numerous optimization tasks, experts directly identify and assess specific types of financial risks of the project, and also draw up the necessary list of measures to minimize possible losses and adjust the structure of the investment portfolio.

It was in the process of research in the field of forecasting that most of the methods of expert assessments were developed. The most famous among them are the Delphi method and the method of working with scoring matrices, which are folded due to the use of linear weighting factors in each individual case. However, there always remains one main problem that is very difficult to deal with: each of the investment analysis experts speaks on the basis of their personal experience, so all decisions made are rather subjective.

Similar shortcomings are encountered in the method of pairwise comparisons. To begin with, they formulate the criteria, and then give them a certain weight of influence on the investment project, so that in the future it would be possible to streamline all the important factors of financial risks.

Profitable investment is one of the main factors
affecting the increase in the profitability of the enterprise.*

This method of investment analysis is based on the classic version, the most common in the world, of assessing the forecast of changes in cash flows generated by an investment project. The difference of this methodology lies in the linkage to the Russian taxation system and the complication associated with taking into account inflation and highly changing economic conditions (variable barrier rates).

By profitable investments, we mean investments made by competent specialists, taking into account all significant financial and non-financial factors. Why can't we just say: effective or profitable investments, often, investments are unprofitable - mandatory, and in this case it is important to choose the least expensive ones. There are situations when the most profitable option for a company is not the most profitable project, but a project that has even lower profitability, but greater profit in absolute terms (an investment option is the choice of one investment project out of several, and there is a lot of capital to invest). Why not say - the relevant theories of investment analysis, often, in addition to financial considerations, are important for the choice, ranging from production, technological, organizational, logistical and ending with environmental factors.

For maximum effect, investment analysis should be carried out taking into account.

The main task of investment analysis is to calculate the effectiveness of an investment project and evaluate its riskiness. In other words, the optimal choice is made according to two parameters: efficiency and risk.

In classical investment analysis, three types of mathematical models can be distinguished that determine the parameters:
amount (NV, NPV, MNPV),
yield (NRR, IRR, MIRR, MIRR(bar),
yield index (DPI) and
payback period (payback, TC-payback, duration)
cash flows generated by the investment project.

Model No. 1. The model includes only cash flows(CF and I). The parameters NV and Payback are determined.

Model number 2. The model includes cash flows and a barrier rate (CF, I and Rbar). The parameters IRR, NPV, DPI, NRR, Duration, TC-payback and MIRR (bar) are determined. In this model, accounting for the change in the value of money over time (using Rbar) is added.

Model number 3. The model includes cash flows, barrier rate and reinvestment rate (CF, I, Rbar and Rrein). MIRR, MNPV and MNRR parameters are determined. Added, in addition to accounting for changes in the value of money over time, accounting for the rate of return on reinvestment (using Rrein).

Calculations according to the type I model were carried out before the widespread introduction of computer technology, for a rough assessment of investment projects. For example, if NV

Calculations according to the type III model are carried out quite rarely due to the insufficient development of software and the lack of estimates (post-investment analysis) and forecasts of the level of reinvestment for companies. Also lack of experience. Because the forecast of the investment project parameters calculated according to the III model is the most accurate, then in the future this type of calculation will take its rightful place in the practice of investment analysis.

The investment analysis process includes the following steps:
1. Compilation of a list of alternative investments.
2. Preparation for each cash flow forecast alternative.
3. Data forecast for calculation and calculation of barrier rates (Rbar).
4. Data forecast for calculation and calculation of the level of reinvestment (Rrein).
5. Calculation for each period of net cash flow.
6. Calculation of investment project parameters (current value of cash flows NPV, IRR, MIRR, DPI, etc.).
7. Sensitivity analysis and assessment of qualitative factors.
8. Evaluation and comparison of alternative investments.
9. Analysis of changes in liquidity and solvency (done for relatively large projects).
10. Post-investment analysis.
11. Investment factor analysis (if necessary).

The first four points should take up approximately 85% of the investment project analysis time.

1. Compile a list of alternative investments

The biggest and most common mistake in choosing an investment project is not considering all possible investment options. .

Possible solutions to the problem:
1. Replacement with new (modern and/or more productive) equipment;
2. Replacement with similar equipment;
3. Subcontract transfer;
4. Do nothing;
5. Stop production.

2. Preparation for each cash flow forecast alternative

Investment analysis takes into account only incremental cash flows, that is, the result of changes in income and costs after taxation, due to the implementation of an investment project. Any costs or incomes, the volumes of which remain unchanged before and after the implementation of the investment project, are not taken into account.

The form for calculation corresponds to Table 2.1 (CASH FLOWS) "Methodological recommendations No. VK 477 ..." (p. 12). Table 2.1 is universal, so some lines are described in more detail and new ones are introduced, taking into account the specifics of equipment change.

Depending on the attraction scheme Money:
- ;
- ;
- .

To forecast cash flows, you need a forecast of data on the tax environment and inflation:
- VAT;
- income tax;
- property tax;
- refinancing rate of the Central Bank of the Russian Federation;
- inflation rate;
- if necessary, other taxes are taken into account (for example, transport tax, unified social tax, tax on the possibility of accidents, etc.).

Note #1. More about this in the help file for the demo version of the program.
Note #2. Detailing the cash flow forecast does not significantly increase its accuracy.

3. Forecast of data for calculation and calculation of barrier rates

For companies operating in countries with low or constant inflation, stable legislation, having a constant level of reinvestment and a constant level of risk or cost of capital, the use of variable rates does not make practical sense (in this case, the unreliability of the cash flow forecast itself and the value of rates significantly exceeds the difference in the level difference rates).

It is possible that the calculation according to the above options is done for the past (nearest) periods and then extrapolation is carried out:
- ;
- ;
- .

4. Forecast data for calculation and calculation of the level of reinvestment

For the possibility of using the 3rd model, a data forecast for calculation is made (data forecast and calculation procedure). As in the barrier rate forecast, a trend extrapolator can be used.

5. Calculation of net cash flow for each period

For the equity financing option and the loan option, you need to produce .
For the loan financing scheme, this is also done.

Depending on the scheme chosen in step 2:

- the procedure for calculating the cash flow ( ;
- the procedure for calculating the cash flow ( .

6. Calculation of investment project parameters

It is better to have few indicators of the investment project, but these indicators must be calculated with a high degree of reliability and fully cover the main characteristics of the investment project.

table with brief characteristics parameters for which investment analysis is carried out.

F(CF) - function, depending on the variable parameter CF;
CF - cash inflow;
I - investment costs (cash outflow);
Rbar - barrier rate;
R bar ef - ;
Rreinv - level of reinvestment.

OS - for a correct comparison of two investments, they must have the same investment expiration date.
RR - for a correct comparison of two investments, they must have the same amount of investment costs.
LR&S - any investment duration and size.

If the forecast of the barrier rate and the level of reinvestment are known with a high degree of reliability, then the MIRR indicator most accurately characterizes the effectiveness (profitability) of the project. If there is no rate data IRR. If there is only a barrier rate, then DPI.

NPV with Modif NPV is similar.

7. Sensitivity analysis and assessment of qualitative factors

An important point in evaluating the effectiveness of investment projects is the analysis of the sensitivity of the criteria under consideration to changes in the most significant factors: the level interest rates, inflation rates, the estimated life cycle of the project, the frequency of receipt of income, etc. This will make it possible to determine the most risky parameters of the project, which is important when substantiating an investment decision.

8. Evaluation and comparison of alternative investments

Depending on the task, the parameters that characterize the investment project are selected, and then they are used to compare and select the optimal (optimal) projects.

In general, each payment stream should be compared with the best alternative in terms of efficiency and risk.

Managing a large number of investment projects is more difficult than managing a few large ones.

In an analytical conclusion, it is necessary to express in words what cannot be described in numbers.

9. Analysis of changes in liquidity and solvency

The reliability of such forecasts (profit-loss statement and balance sheet), in modern Russian conditions, is so low that it makes no practical sense to use their data to calculate long-term forecasts, except for analyzing changes in liquidity in the initial periods.

It is far from a trivial task to make a truly reliable forecast of the TLE and BV for a period of more than 2 years: there are too many random and independent factors that affect these indicators.

To justify the receipt of a loan and financing under the leasing scheme, it is better to indicate that no major changes are foreseen for the period of the project: i.e. taking additional loans, etc. or describe possible changes.

Data forecast and calculation for .

10. Post investment analysis

Allows you to analyze errors and shortcomings and thereby improve the evaluation of subsequent investment projects. Raises the skill level of an analyst.

11. Investment factor analysis

Factor investment analysis is used to determine the degree of influence of an investment project on the main performance indicators of an enterprise and includes the calculation of the following indicators:
- - characterizes the profitability of the investment to increase the gross volume of production;
- - characterizes the profitability of the investment to reduce costs;
- - characterizes the profitability of the investment action to reduce labor costs for the production of a unit of output;
- - similar to the previous one, but with recalculation for a decrease in the number of personnel;
- characterizes the profitability of the action of the investment to increase the volume of profit;
- - assessment of the increase in profit from the project due to the action of additional investments;
- - assessment of the reduction of the payback period of the project due to the action of additional investments;
- - assessment of such factors as the volume of manufactured products, the downtime ratio, the related costs, the number of employees and labor costs for the relevant indicators.

It is necessary to study the dynamics of these indicators, the implementation of the plan, conduct an inter-farm comparative analysis, determine the influence of factors and develop measures to increase (decrease) their level.

The main direction of increasing the efficiency of investments is the complexity of their use. This means that with the help of additional investments, enterprises must achieve optimal ratios between fixed and circulating assets, active and passive parts, power and working machines, etc.

Literature

Holt N. Robert, Barnes B. Seth. It was this book that formed the basis of the above methodology and program.

Program implementation will be carried out in Altair Investment Analysis 2.xx.

* In the old version of the methodology it was "Competent investment", at the time of writing, many years ago, judging by the examples of investment projects given on the Internet, it was, in my opinion, relevant, despite the fact that it jarred - they don’t talk like that about inanimate objects. The idea was to shift the perception of the methodology towards understanding the economic meaning of the calculations.

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Investment analysis
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Investment analysis is a set of actions that allow you to evaluate the effectiveness of investments in a particular project. Let's consider the methods of such an analysis in order to understand how to avoid mistakes in evaluating the effectiveness of investment projects.

Tasks of investment analysis

Investment analysis is a set of actions that allow you to evaluate the effectiveness of investments in a particular project. Correctly and timely carried out mechanism solves the following tasks:

• Determines the compliance of the project with the strategic development goals of the investor company;
• Estimates the planned need for investments, distributed over the planning horizon;
• Calculates the optimal financing structure;
• Identifies factors (threats and opportunities) that can significantly affect the project;
• Determines the compliance of cash flows with the expectations of beneficiaries;
• Identifies key development points for subsequent control of quantitative and qualitative indicators

The result of the analysis of investment projects is a package of documents for making an investment decision. The composition of the package of documents may vary, but the main components can be distinguished:

Main stages of investment analysis

At the first stages, information is collected, data is analyzed to form a package of documents. This stage is called pre-project or pre-investment.

During this period, the collection and initial analysis of information takes place, but the decision on financing directly to the project has not yet been made. When a positive decision is made, the implementation phase of the project begins. The objective of this stage is to achieve the investment goals set out in the approved project documents. The completion of an investment project is its reclassification into operating activities or exit from the project.

The conclusion of the working group is an approved document in which the working group of the pre-project stage presents a reasoned point of view. This is an expert opinion that was not reflected in other documents of the investment analysis, but at the same time is essential for making a decision.

It is possible to avoid errors in the evaluation of investment projects and, as a result, incorrect conclusions if the rules for conducting investment analysis are approved by a separate regulation. We will tell you how to prepare such a document,

A teaser or prospectus is a document summarizing the initial analysis. Based on this document, a decision is made on the start of the pre-project stage or the refusal to invest.

There are many options for classifying projects depending on the goals, the amount of investment, the timing of implementation and the form of ownership. From the point of view of organizing the investment process in a commercial company, it is advisable to single out the following groups of investments:

• Real - represent financial investments in the acquisition or creation of real tangible or intangible assets;
• Financial investments are generally associated with the acquisition of securities without active involvement in operations.

Real investments should be divided into:

• business projects;
• organizational projects.

The meaning of the division is that the return on business projects can be reliably calculated, while it is rather difficult to calculate the income from the implementation of organizational projects. For example, it is difficult to calculate the investment return on the implementation of an ERP system in a company. In this case, only costs can be estimated relatively reliably.

Before making a decision on the implementation of a new investment project or comparing it with alternative ones, it is necessary to make sure that no mistakes were made when evaluating its effectiveness. This solution will help to detect flaws in the calculations and correct them.

Business plan and financial model

Business plan is the main document of investment analysis. The main section of the business plan is the financial model. All other sections of the business plan are presented to support the financial projections reflected in the model.

The financial model defines:

• Cash flows of the project;
• Volume and schedule of financing;
• Project performance indicators;
• Schedule for receiving income from the project;
• Change of financial forecasts depending on various scenarios of project implementation.

An example of the financial model of an investment project and the calculation of performance indicators is presented in the file below (the file should be opened with the iterative calculation mode active).

Investment analysis methods

The basis of investment analysis is the construction of a model of return on invested capital. The discounted cash flow method is used to calculate the return on invested capital.

The main performance indicators of the investment project, calculated using the discounted cash flow method, are:

Where: IC - initial investment;

In the attached example of a financial model, the indicators of the investment attractiveness of the project convinced investors of the prospects of the project. In general, there are more than 100 additional indicators that can be used when analyzing the results of calculations. They should be chosen based on the priorities dictated by the project and the financial capabilities of the investor.

When analyzing the calculation results, you should also pay attention to the following:

1. Source of income should be clear. It is important to solve the problem of producing a quality product, but this is not enough. It takes no less effort, time and resources to get the product of the project on the market. And here it is important to understand what exactly the project will offer the market in order to attract a buyer.

2. A separate project team analysis. A strong team is able to maximize revenues or rebuild a project if it fails. A weak team will critically reduce the potential of any project. If it is initiated by a third-party company, then special attention should be paid to the analysis of the reputation and financial condition of a potential partner.

3. Financial plan should be synchronized with the action plan reflected in the business plan.

4. The business plan should pay attention not only to financial forecasts, but also to analysis of non-financial indicators. For example, monitoring planned product testing activities will provide the necessary information before it is reflected in the financial results.

5. Risk is present in absolutely every investment. Sensitivity analysis and scenario analysis should provide an answer to the question of changes in the financial performance of the project depending on various assumptions. Investors should present the possible consequences in case of failure or additional income in case of more successful implementation. Cm.,

6. In addition to the main indicators (NPV, IRR, DPP and PI), priority should be given to directly planned cash flows. How realistic are the cash flows generated by the plan? Does the planned dynamics correspond to the current practice?

7. The presence of a sharp increase or decrease in any financial indicators (for example, revenue or profitability) must be justified. If there is no reliable justification, then the calculations should be additionally checked and the forecasts revised;

8. Splitting the project into key stages can significantly save resources. If a key milestone is not achieved, reasons should be carefully analyzed before funding the next milestone;

9. Providing the project with resources and high motivation of the project team is not enough. Attention should be paid to balanced monitoring and review during project implementation. The project team does not take risks in whole or in part own funds in addition, the goals of the performers and the investor differ from each other. Control is designed to balance interests and promptly inform about the upcoming threat. Investment analysis does not end at the stage of making a decision on project financing. On the contrary, in this case, investment decisions will have to be made constantly.

Summary

Conducting investment analysis – required condition when making significant investment decisions. The quantity and quality of the analyzed indicators, a package of documents and recommendations is formed individually for each project. The result of the investment analysis should give an unambiguous recommendation - to invest in the project or to refrain from this step.

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