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The Definition And Phases Of The Investment Project

Let’s consider the approximate contents of phases of life cycle of the investment project.

The first phase is before investment, previous the basic volume of investments cannot be advanced precisely enough. In this phase the project possibilities are developed, studied, preliminary technological researches are carried out, negotiations with potential investors and other participants of the project are carried on, suppliers of raw materials and the equipment get out. If the capital investment project provides attraction of credit in the given phase the agreement on its reception is entered into; legal registration of a capital investment project is carried out: preparation of documents, registration of contracts and enterprise registration.

The expenses connected with realization of the first stage, in case of positive result and transition to project realization capitalize and also it is a part of preindustrial expenses and then through the amortisation mechanism concern on product cost.

The second phase is investment when there is an investment or project realization. In the given phase the concrete actions requiring much bigger expenses and having irreversible character are undertaken, namely: the documentation is developed design-estimates; the equipment is ordered; industrial platforms are prepared; the equipment is delivered and its installation and balancing and commissioning is carried out; personnel training is conducted; publicity is led.

On this phase constant assets of the enterprise are formed. Some expenses, them still name accompanying (for example, costs for personnel training, realization of advertising campaigns, start-up and adjusting) can be partially carried on self-cost production (as costs of the future periods) and are partially capitalized (as preindustrial expenses).

The third phase is operational (or industrial). It begins with the moment of commissioning of the capital equipment (in case of industrial investments) or property acquisition or other kinds of assets. In this phase start-up in enterprise action is carried out, production or rendering of services begins, the bank credit in case of its use comes back. This phase is characterized by corresponding receipts and current costs.

Duration of an operational phase exercises a significant influence on a project general characteristic. The further time is its top border and is carried the more cumulative size of the income.

Essential to advance that moment on reaching which receipts already directly cannot be connected with initial investments (a so-called investment limit). At installation, for example, the new equipment term complete moral and physical depreciation will be such limit.

The general criterion of life expectancy of the project or the period of use of investments calls importance, from the point of view of the investor the money incomes received as a result of these investments. So, at realization of a bank expert examination about credit injection term of a life of the project will coincide with an indebtedness maturity and the further destiny of investments bank does not interest. Established terms approximately correspond to the payback periods which have developed in a given sector of economic activity or a reflexivity of long-term investments. However in the conditions of the increased investment risk average duration of projects accepted to realization will be more low than in stable economy.

It is very important that government, despite this crisis is not leaving to assist small businesses. And small business grants can be a true helper right now.

But, of course, you should understand that today the fight for small business grants as well as for other types of grants has become harsher. This is logical – more businesses need them. So before you start your fight for the small business grants, please check out this blog for more
details about grant industry.

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