Effectiveness of the investment project

 

 

The Methodological Recommendations for Assessing the Effectiveness of Investment Projects give the following definition: The effectiveness of an investment project is a category that reflects the compliance of the project generating this IP with the goals and interests of its participants.

The implementation of effective projects increases the gross domestic product (GDP) at the disposal of the company, which is then divided between the entities participating in the project (firms (shareholders and employees), banks, budgets of different levels, etc.). The income and costs of these entities determine various types of effectiveness of individual entrepreneurs.

It is recommended to evaluate the following types of effectiveness:

the effectiveness of the project as a whole;

effectiveness of participation in the project.

The effectiveness of the project as a whole is evaluated in order to determine the potential attractiveness of the project for possible participants and to search for sources of financing. It includes:

social (socio-economic) efficiency of the project;

commercial efficiency of the project.

Indicators of social efficiency take into account the socio-economic consequences of the implementation of IP for society as a whole, including both the direct results and costs of the project, and "external":

costs and results in related sectors of the economy, environmental, social and other non-economic effects. "External" effects are recommended to be quantified in the presence of appropriate regulatory and methodological materials. 

 

In some cases where these effects are very significant, in the absence of these documents, the use of assessments by independent qualified experts is allowed. If "external" effects are not quantifiable, a qualitative assessment of their impact should be undertaken. These provisions also apply to regional efficiency calculations. In cases where the IP affects the interests of several countries rather than one, public efficiency characterizes the project from the point of view of the entire system as a whole.

 

 In the case of a "purely" individual entrepreneur, public efficiency coincides with national economic efficiency.

Indicators of commercial efficiency of the project take into account the financial consequences of its implementation for the participant implementing the IP, assuming that he produces all the costs necessary for the implementation of the project and uses all its results.

Indicators of the effectiveness of the project as a whole characterize from an economic point of view technical, technological and organizational design solutions.

The effectiveness of participation in the project is determined in order to verify the feasibility of the individual entrepreneur and the interest of all its participants in it.

The effectiveness of participation in the project includes:

• the effectiveness of participation of enterprises in the project (the effectiveness of individual entrepreneurs for participating enterprises);
• efficiency of investing in shares of the enterprise (efficiency for shareholders of joint-stock enterprises - participants of individual entrepreneurs);

the effectiveness of participation in the project of structures of a higher level in relation to the enterprises participating in the individual entrepreneur, including:

• regional and national economic efficiency - for individual regions and the national economy;
• 
  sectoral efficiency — for individual sectors of the national economy, financial and industrial groups, associations of enterprises and holding structures;
  

budgetary efficiency of individual entrepreneurs (efficiency of state participation in the project in terms of expenditures and revenues of budgets of all levels).