Wednesday 26 January 2022

Evaluation of the effectiveness for project


Evaluation of the effectiveness of the project is the process of analyzing the costs of resources for the implementation of the project and the results obtained, its compliance with the goals set and the expectations of all participants.

Determining the effectiveness of the project also allows you to assess the level of its attractiveness for potential participants and attract foreign investment.

Tasks of evaluating the effectiveness of the project


To ensure the competitiveness of business in modern conditions, it is necessary to constantly monitor the projects being implemented, as well as to assess their effectiveness. The evaluation process involves the following list of main tasks:

  1. determination of the percentage of feasibility, which means checking the satisfaction of the project with all the required parameters and established limits;
  2. determination of the feasibility of the project implementation, which involves the consideration and comparison of cumulative results and costs incurred;
  3. study of the comparative effectiveness of the project, research and comparison of its advantages in comparison with analogues and alternative ideas.

 Methods for evaluating the effectiveness of the project


The process of assessing the effectiveness of a particular project is based on the use of a set of certain indicators that allow us to consider various components of the economic, financial, social and other areas of the project.

To carry out the assessment, various methods are used that have a single principle - the main result of the implementation of any project is the organization's profit.

With this in mind, the evaluation methodologies include such indicators that allow the most complete study of the project and, as a result, provide its detailed picture to all interested parties.
In practical application, the following groups of evaluation methods are most common:


This is a fairly simple technique that allows you to get all the necessary information, especially in the first stages of the analysis. This group includes the following values:

Payback period of investments.

With the help of this indicator, the period during which the company will be able to return all the invested investment funds at the expense of the income received as a result of its activities. The main point is to provide a potential investor with information on how long he will be able to return his invested funds;

Coefficient of efficiency of investments.

This indicator allows you to see how much profit a potential investor can receive on his invested funds in the event of a full implementation of the project. At the same time, such a profit per unit of invested funds should not be lower than the established interest rate for long-term bank loans.
Statistical methods have some drawbacks, the main of which is the exclusion of the time factor. Also, when making calculations, values are used that cannot be compared. All this leads to a certain amount of distortion of the results.

2. Dynamic



This group of methods can be described as complex, since a large number of different values are used for analysis. As a rule, these methods are used to study long-term projects, which, moreover, require additional financial injections in the process of implementation. The following values are used:

  1. net discounted income. It shows the growth of the company's capital, and therefore the positive value of this indicator is a weighty argument for the adoption of the project. If there is a question of choosing between several projects, then the decisive factor is precisely the greater value of this indicator;
  2. ROI index The calculation of this value allows you to see the ratio of the cost of cash inflow and outflow in the current period. This takes into account the amount of initially invested investment funds. A draft should be accepted if the indicator is greater than one;
  3. internal rate of return. This value determines the maximum possible level to which the costs of implementing all stages of the project can reach;
  4. modified internal rate of return. Based on the calculation of this indicator, the company can reinvest if there was a repeated outflow of financial resources during the implementation of the project;
  5. discounted payback period of investment. Based on this value, the period during which the income received from the launch of the project will cover the investment resources invested in it is determined.


Very often, the lack of experience and professional skills of the company's specialists in choosing evaluation methods leads to the unreliability of the results obtained, as well as a certain amount of subjectivity in the conclusions. That is why, to obtain an objective picture, companies resort to the help of independent third-party experts.

Criteria for evaluating the effectiveness of the project


Evaluation criteria allow you to establish certain benchmarks that are taken as a basis in the process of studying all aspects of the project. The group of simple criteria includes:

  1. the payback period of the invested funds, which allows you to see how long the originally invested resources will be returned;
  2. a simple rate of return that reflects the part of financial investments that is reimbursed by the profit received during a certain planned interval. This criterion allows you to quickly evaluate the project, which is especially important if there is a shortage of funds.

Also, criteria are often used, which are based on the calculation of the time value of monetary resources. These include the profitability index, net discounted income, discounted payback period, etc.
The evaluation criteria used to date make it possible to weigh all the arguments and make an informed decision on the feasibility of implementing a certain project for both business owners and potential investors.


Indicators for evaluating the effectiveness of the project


Performance indicators reflect the quantitative characteristics of the results of the implementation of a project. When considering certain indicators, it is necessary to take into account such important factors as the scope of the company's activities, its economic level of development, as well as the features of the project under study.


This is necessary to develop the most optimal scorecard that allows you to evaluate all parameters as accurately and informatively as possible.

All the main indicators can be divided into the following groups:


  1. reflecting financial and commercial performance, which allows you to determine the economic impact for all project participants;
  2. displaying budget efficiency. These indicators demonstrate the impact of a particular project on the budgets of different levels;
  3. determining social-economic results. On the basis of such indicators, the effect of the implementation of the project is determined, which extends both to its direct participants and to indirectly affected parties.

Project Performance Evaluation Services

Project performance assessment services provide an objective report on various aspects of the impact of the project under study for the possibility of making a decision on the feasibility of its implementation or investment.

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