Finance Project

Financing Business Project

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Financing Business Project

In the start of a business project , it should be determined whether the undertaking is worth the investment . It is important to establish the effect of the project in the company . It is said in the problem that the project requires 10 million for preliminary funding . To determine the effectiveness of the project , the Return on assets should be calculated (Groppelli Nikbakht , 2005 ) The return of assets shows what the company can

do with what it owns . For example , it can determine how many dollars of earnings the company can obtain from each dollar of assets they manage . ROA will be useful in this situation because it will determine how much of the will be used as the preliminary funding that the company needs to provide the project for its launch . The assets of the company

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Next , the ROA will be compared to the Debt Ratio of the company . The Debt Ratio is a financial ratio that refers to percentage of the company 's asset in debt (Groppelli Nikbakht , 2005 ) If there the company has a high debt ratio , then it shows that the company 's assets are not highly liquid and could mean that it must not venture into risky projects . This is because , with non-highly liquid assets due to debt the company could...