Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Policy Making > Financial Analysis > Flashcards

Financial Analysis Flashcards

1
Q

Why is a financial analysis needed

A

To assess the financial impact of proposed capital expenditure
Part of business case
Building block in appraisal process

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is an economic appraisal

A

Looks at social impact of proposal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does a financial analysis do

A

Considers direct financial impacts and affordability by assessing value of net cash flow from project implementation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

5 objectives of financial analysis

A

Estimate cash flow for different options
Assess funding sources
Assess impact of each action re cost
Examine return for different funding
Calculate performance indicators such as NPV and FIRR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Projects under 1 million

A

Simplified cash flow analysis by sponsoring agency and do gross impact analysis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Projects over 1 million

A

Sponsoring agency does detailed discounted cash flow analysis and gross impact calculation and incremental impact calculation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Significant income or funding projects

A

Exchequer cash flow analysis with gross and incremental impact calculations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Main difference with financial and economic analysis

A

Economic Used by public sector and shadow prices included

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Steps for projects under 1m

A

Capex - capital expenditure DT
Opex - operating costs
Maintenance costs
Decommissioning costs
Tax
Revenue losses of existing projects
Income generated by project
Subsidies
Residual terminal value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Exclusions for financial analysis of projects under 1m

A

Cost savings don’t count as benefit and reduction
Sunk costs - money already spent
Depreciation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is optimism bias

A

People overestimate the likelihood of positive events

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

4 steps to manage practical application of financial analysis

A

1- accounting for optimism bias
2- include contingency cost
3-risk assessment
4- sensitivity tests

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What’s the first step in a financial analysis in projects over 1m

A

Identify a Counter factual ie do nothing- do minimum

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Second thing in FA of projects over 1m

A

Calculate gross and incremental cash flows

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What do you need for a bottom up benchmarking

A

Existing design

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What do you need for top down benchmarking

A

Compare Components of existing projects

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is residual value

A

Future value if good after depreciation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a Monte Carlo analysis done in risk assessment of projects more than 1m

A

A model used to predict the probability of a variety of outcomes when potential for random variables is present

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Who sets the financial discount rate

A

National development finance agency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Things to watch out for in FA

A

Double accounting
Include vat
Using incorrect discount rate
Mismatching real and nominal values

21
Q

Behaviour bias

A

People make decisions which affect society

22
Q

What are contingency costs

A

Unforeseen events

23
Q

What is dead weight

A

Outcome that would’ve happened without intervention

24
Q

What is decision gate

A

4 milestones to approving authority to progress refine or abandon proposals

25
Q

Demand analysis

A

Assessment of forecast of use of a new asset informed by future demand and demographics

26
Q

What is discounted cash flow analysis

A

Valuation method to estimate value of investment based on future cash flow

27
Q

What is discounting

A

Allows benefits and costs from different time periods be compared by expressing value in present terms

28
Q

What is displacement

A

Creation of new output in one area leads to loss of output in another

29
Q

What is ECBR

A

Economic cost benefit ratio
Calculation is sum of present value of benefits divided by sum of present value of costs

30
Q

What is economic net present value

A

Sum of discounts cash flows over appraisal period

31
Q

What is economic payback period

A

EPP is the amount of time to recover an investment until it breaks even

32
Q

What is economic rate of return

A

Discount rate over life of project at which costs and benefits are equal

33
Q

Evaluation

A

The process of assessing an intervention to determine its efficiency and effectiveness in achieving an objective

34
Q

EAP

A

External assurance process is for projects greater than 100 m has independent reviews on cost, risk and ability to deliver

35
Q

What is financial benefit cost ratio

A

Shows relationship between costs and benefits of project in FA

36
Q

FIRR

A

Financial internal rate of return is the discount rate at which costs and benefits ratio discounted over project lifecycle are equal

37
Q

What is NPV

A

Net present value sum of total discounted financial benefits minus total discounted financial costs

38
Q

What is MPAG

A

Major projects advisory group supports DPER in managing external assurance

39
Q

Logic path model

A

Map out cause effect relationships between results and impacts

40
Q

Medium term exchequer envelopes

A

Rolling multi annual capital allocations

41
Q

Opportunity cost

A

Value of resource at its most productive alternative use

42
Q

Non voted expenditure

A

Money paid out of central fund which has no annual reference in Dail

43
Q

PPP

A

Public private partnership long term partnership between public sector and private company to deliver services not assets

44
Q

Public spending code

A

Sets value for money requirements for capital expenditure projects

45
Q

Proportionality

A

Complexity of appraisal should match project

46
Q

Reference class forecasting

A

Method of estimating project costs which mitigates optimism bias based on actual outcomes of similar

47
Q

Virement

A

Savings from one subhead to cover excess expenditure on another subhead

48
Q

Strategic assessment report

A

First phase of lifecycle

49
Q

Switching value

A

Required change in input to render project NOV neutral

Policy Making (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions