HKSTP Lunch & Learn named “Finance for Non-Financial People” was launched on 21 Feb 2017 for acquiring the investment appraisal techniques. The agenda included “Objective”, “SWOT”, “Operating Plan” and “Financial Model”.
In Objective session, we analyzed “Why”, “When” and “How” as follows:
- Evaluate the profitability of an investment to determine if it is worthwhile;
- Compare different projects to determine which is more valuable
- Newly introduced requirement (e.g. Capex or Opex >$500k)
- Step-by-step guide on preparing procurement request and investment appraisal
- Demonstrating example
Then 7 key elements of investment appraisal was introduced and they were:
2. Justification / Rationale
3. Operation Plan – Marketing and Promotion
4. Operation Plan – Operating model + resources
5. Operation Plan – KPI
6. Operation Plan – Milestones + Exit Plan
7. Financial Model
For SWOT analysis, it demonstrated the Strength, Weakness, Opportunity and Threat as well as Internal & External.
For Operation Plan, they should consider:
i) Marketing and Promotion
- Target customer
- Sales channel
- Value propposition
ii) Operating Model
- Internal operate
iii) Incremental resources
- Preparation time
- Start of operation
- Ramping up
- Project Review
vi) Exit strategy
- Worst case
- When to exit
Financial model included time frame for evaluation, business drivers and assumptions.
P/L example was mentioned.
Finally, the measuring investment return was explained and they included Cash Impact, Payback Period, Net Present Value (NPV) and Internal Rate of Return (IRR).
Reference:HKSTP - http://www.hkstp.org