Approaches for evaluating and financing investment projects

Author:Maria-Loredana Popescu
Position:Teaching Assistant, 'Nicolae Titulescu' University, Bucharest
Pages:253-260
Maria-Loredana Popescu
253
LESIJ NR. XVIII, VOL. 2/2011
APPROACHES FOR EVALUATING AND FINANCING
INVESTMENT PROJECTS
Maria-Loredana POPESCU
Abstract
This article presents the financial investment approach and the investment evaluation
methods, which are criteria for assessing both investment projects and their funding sources. An
important role in the analysis carried out is played by the investment decision and financing
decision quality. Making an investment decision implies computing the related investment
efficiency indicators. They allow the comparison of several variants of the same investment project
as well as their comparison with other projects in the same industry or in other industries. The
financing decision concerns the selection between their own sources (share capital, depreciation
fund, profits, reserve funds, additional capital, revenues from investments), attracted sources
(domestic resource mobilization) and borrowed sources (credits).
Keywords: financial approach, investment evaluation methods, investment decisions,
profitability, funding sources.
Introduction
Adopting an investment project involves a careful analysis of the company overall standing.
Investment projects have a particular importance for developing a business as they prepare the
production capacity and conditions to be achieved, therefore influencing the results and the
financial balance. The project idea comes from the need to meet a current demand or from the
desire to take advantage from some opportunity.
The decision regarding the project accomplishment requires that a lot of elaborated basic
actions should be carried out by specialists from various fields of interest. As investments require
important long-term financial resources, investment projects present significant risks, most often
their launching being irreversible. Favorable financial perspectives can be obtained either by
continuing the existing activities or by making investments and launching new activities. The
company's financial managers must assess past investments and future investment needs. The past
investments must be evaluated and the effects of the future accepted projects must be foreseen.
The term "investment" means, strictly speaking, the use of financial resources that are meant
to allow the entry into the company’s patrimony of fixed inputs (buildings, constructions,
machinery, plants, equipment, tools, etc.) either by acquisition or by their effective creation.
In financial terms, investment means a long-term capital asset undertaking so as to achieve
higher future returns.
The funding of investments covers, to a large extent, the sphere of financial requirements at
company level and takes into account both the own and borrowed sources as well as the permanent
and temporary sources.
The investment effect enhances the volume and quality of a company’s activity.
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Teaching Assistant, “Nicolae Titulescu” University, Bucharest, (e-mail: maria.loredana_popescu@yahoo.com)

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