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Economic & Financial Appraisals

Financial appraisal

Financial appraisal views investment decisions from the perspective of the organisation. It assesses the viability of a project based on the direct effects on the cash flow of the organisation. It considers whether the projected revenues will be sufficient to cover expenditures and whether the financial return is sufficient to make the investment commercially viable (profitable). 

Economic appraisal

Economic appraisal is a more comprehensive method of analysing project costs and benefits than financial appraisal. Economic appraisal uses either cost benefit analysis or cost effectiveness analysis to assist decision makers to choose between:

  • Alternative project options designed to achieve the same objective
  • A range of projects directed at a variety of objectives which cannot all proceed due to resource constraints.

An economic appraisal differs from a financial appraisal in that it measures the external benefits and costs of the project (including any revenue foregone), as well as the impact of the proposal on the organisation. The economic assessment assesses the broader community benefits and costs of the project to determine whether, overall, society will be better or worse off as a result of the investment.

The purpose and objectives of financial and economic appraisals are quite different so it will not always be the case that a project that is financially viable will be economically viable or a project that is economically viable will be financially viable. 

Our team has extensive experience in developing business cases and in assessing the feasibility of project/proposed investments. We work with both public and private sector clients to develop a range of options for their proposed project/investment and we undertake economic and financial evaluations on these options to determine whether the project/investment will be financially viable

 
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