Lecture7: Cashflow table

Question 1

How do we decide what projects to invest in?

Answer 1

Cost, revenue and income of the project.

Question 2

Challenges faced when investing in projects?

Answer 2

Reliable estimations and a decent measure of precision/risk involved.

Time scales for the project as we need to predict and take account of time in which revenue and costs will occur.

Different options for different projects may have different time scales associated with them.

Question 3

Economic analysis of a project?

Answer 3

Estimated costs:

Initial capital costs
Operating costs

Estimated expected revenues as well

Question 4

Costs over a time period

Answer 4

Initial capital costs (starting up costs)

further capital costs (maintenance, plant update, Expansion)

Operating costs throughout the process (could change with raw material prices and resources, improved technology, labour supply/demand)

Question 5

Revenues over time periods

Answer 5

(Only gained as we make/sell a product)

Is the demand seasonal/ in fashion

Do customers pay on time, is the product being Leased/rented?

Will our market share of our product vary over time (go up or down) or remain the same?

Are raw materials seasonal (crops) and rare to get?

Question 6

Other variables that come in and out of cash-flow

Answer 6

Outputs
Investments (initially more a cost than a source of income)
Tax on profits
Depreciation if assets

Inputs
Assets

Question 7

Key variables of a cash flow diagram

Answer 7

Investments
sales 
Variable costs
Fixed Costs 
Tax
Short term pool value