1. The document discusses the nature and purpose of a feasibility study, which analyzes the practicality and viability of a proposed business plan or project.
2. A feasibility study involves a systematic, step-by-step inquiry into various factors like the market, competition, finances, technology and more to determine if a project is viable in all assessed areas.
3. The study aims to enhance sustainability, facilitate evaluation of success, seek investment, and determine return on investment to minimize business risks for investors.
1. The document discusses the nature and purpose of a feasibility study, which analyzes the practicality and viability of a proposed business plan or project.
2. A feasibility study involves a systematic, step-by-step inquiry into various factors like the market, competition, finances, technology and more to determine if a project is viable in all assessed areas.
3. The study aims to enhance sustainability, facilitate evaluation of success, seek investment, and determine return on investment to minimize business risks for investors.
1. The document discusses the nature and purpose of a feasibility study, which analyzes the practicality and viability of a proposed business plan or project.
2. A feasibility study involves a systematic, step-by-step inquiry into various factors like the market, competition, finances, technology and more to determine if a project is viable in all assessed areas.
3. The study aims to enhance sustainability, facilitate evaluation of success, seek investment, and determine return on investment to minimize business risks for investors.
1. The document discusses the nature and purpose of a feasibility study, which analyzes the practicality and viability of a proposed business plan or project.
2. A feasibility study involves a systematic, step-by-step inquiry into various factors like the market, competition, finances, technology and more to determine if a project is viable in all assessed areas.
3. The study aims to enhance sustainability, facilitate evaluation of success, seek investment, and determine return on investment to minimize business risks for investors.
FEASIBILITY STUDY • An analysis or research into the practicality of a proposed plan or method, based on factors like marketplace, competition, available, technology, manpower, and financial resources. (Dictionary.com n.d.) • An analysis of the ability to complete a project successfully, taking into account the legal, economic, technological scheduling and other factors. (Investopedia.com n.d.)
NATURE OF AFEASIBILITY STUDY
• SYSTEMATIC INQUIRY • PROPOSED BUSINESS ACTIVITY • VIABILITY IN ALL AREAS • MEASUREMENT OF PROFITABILITY LEVEL
SYSTEMATIC INQUIRY • The term systematic implies two things. First, it implies that there is a procedure, or a step-by- step process involved in the conduct of a feasibility study. An individual conducting a study has to follow definite procedures in investigating a business opportunity that needs to be addressed. The procedural steps, however, are not fixed. They can be modified according to the existing conditions within which the study is conducted. • Second, systematic means that the whole study is composed of different phases or aspects. Each phase has unique characteristics that ultimately contribute to the attainment of the objectives of the whole study. Despite the various aspects of the study having different objectives, they should be well-coordinated and interdependent. The findings of one aspect should support other areas, or they may be used in formulating a solution in other areas. This interlocking relationship of the various parts of the whole system implies that work previously performed may be repeated or reviewed if new developments or findings arise. The person conducting the study can move forward to the next phase anytime or move backward by reviewing, modifying, or amending the findings or results in the previous phases. • Historical data should come from reliable sources such as the Philippine Statistics Office (PSA), Bangko Sentral ng Pilipinas (BSP), Securities and Exchange Commission (SEC), Philippine Stock Exchange (PSE), National Economic and Development Authority (NEDA), Board of Investments (BOI), and other line agencies of the national government. Historical data, therefore, are not hypothetical but empirical in character. PROPOSED BUSINESS ACTIVITY • A project feasibility study only applies to a business endeavor. A business is an organization engaged in lawful commercial activities such as providing products or services for monetary consideration with the intention of realizing profit. Any study that is not conducted to promote a business activity and is, instead, done to determine the benefits or needs of a particular community, similar to a project proposal, cannot be considered a project feasibility study. • An activity should have the following characteristics to qualify as a business activity: 1. It should be intended for profit. 2. It should be regularly undertaken. 3. It should be financial in character. In some respects, however, a feasibility study is similar to other studies (e.g., a project
VIABILITY IN ALL ASPECTS
• A project feasibility study tests the viability of a business endeavor in not only one but all aspects. The viability of an activity is the primary concern of prospective investors. There may be instances wherein a project is viable in one aspect of the study but not in other areas. Viability in all areas ensures a higher chance of attracting and convincing prospective investors.
As a precautionary measure, a researcher should not immediately conclude that a project is
feasible simply because it is proven to be viable in one area. To reiterate, viability should be proven in all aspects of a project.
MEASUREMENT OF PROFITABILITY LEVEL
• It is important to measure the level of profitability of a chosen project against other possible projects. A proposed business endeavor may appear to be profitable, but if its profitability level is below that of other projects with a similar capital base, manpower requirements, or management capability, such profitability does not carry any weight in the evaluation and implementation processes. Investors may not commit funds to such a project as it involves opportunity cost. • A business that cannot achieve the profitability level required in the industry to which it belongs will experience business difficulties. An instance in which a business difficulty occurs is when a firm can hardly meet the working capital requirements. A business difficulty refers to a stage wherein a firm cannot attain normal profitable operations. With a good project feasibility study, a business organization may avoid experiencing business difficulties.
A project feasibility study can be described as follows:
1.A project feasibility study is not the product of a simple and superficial investigation on the viability of a business endeavor. It serves as the framework on how a business project can easily be performed. 2. It does not put emphasis on bureaucratic processes in objectives. It highlights the significance of the thinking process.
3. It is not rigorously undertaken for new business projects only. A feasibility study may also serve the requirements of existing businesses, especially on the aspect of plant expansion, additional product lines, or new business opportunities. 4. It can be credited for a favorable success experienced by a business. Hence, a business without a good feasibility study is more likely to fail than succeed.
5. It embraces key areas of other disciplines such as economics, marketing, management,
accounting, taxation, engineering, quantitative analysis, mathematics, logic and reasoning, and business report-writing. 6. It is undertaken primarily by profit-oriented organizations. As such, non-government organizations and the government, including any of its political subdivisions or instrumentalities, do not undertake feasibility studies 7. It involves a cost-benefit analysis which illustrates that the benefits derived from the study should exceed the total estimated costs. Thus, studies having more costs than benefits are not usually favored by prospective investors. 8. It is a special type of research inquiry whose forecast relies heavily on the documentation of historical data. The data are usually obtained from records, statistics, and documents of various offices and government agencies.
PURPOSES OF A FEASIB STUDY
1. Enhance the sustainability of a particular business endeavor undertaken 2. Easily facilitate the evaluation of a project's success in all areas covered by the study 3. Seek the infusion of additional fresh working capital from a financial institution 4. Determine the recovery period of capital investment or the expected return on investment 5. Serve as a measuring instrument in evaluating actual project results 6. Mitigate, if not totally avoid, the expected business difficulty that may be experienced during the actual implementation of the project 7. Meet and satisfy the requirements set by the investors of a proposed business project
1. For the benefit of the project proponents, it is still the most scientific instrument, with different interdependent aspects, that can be used in project design or redesign. 2. It can minimize, if not totally eradicate, the business difficulty that may be experienced in the actual implementation of the project. This would greatly benefit the prospective investors. 3. It is considered the most reliable instrument in making a decision of whether to implement or discard a project, which would also directly benefit the investors.
4. It is the most comprehensive medium that can be used to evaluate a project in terms of infusing additional fresh capital or granting tax exemption incentives. Financial institutions and government agencies could make use of the results in these areas of the feasibility study. 5. It is an effective tool for evaluating the profitability level and sustainability of a proposed project. Prospective investors put much weight on this aspect of a project during the analytical process.
