FINANCIAL ANALYSIS METHODS
CBA (Cost-Benefit Analysis)
CBA is a method that is used in the analysis of only those kinds of alternatives whose results can be measured in terms of their monetary value. A CBA allows the comparison of the advantages of individual options considered for project-specific stakeholders.
The essence of the CBA method measures the impact of investment on actors, determines the quantification of the effects observed and further transfer to a common numeric (ideally financial) unit.
The CBA method compares the benefits which express any positive effects of cost, or injury which have any negative effects on investment. The aim of the analysis is to determine whether the project is beneficial for promoting the success of an organization, or whether the project is ineffective.
Using this method, INESAN is able to quantify not only all the financial costs and revenues for projects or programs, but also all indirect consequences. At the same time INESAN can judge all other positive and negative social effects that individual projects can bring. It is also possible to make a comparison between the benefits and losses in cases where projects were implemented to define the difference between a project made and fallacious results.
CEA (Cost-Effectiveness Analysis)
The CEA method was developed in the 1950s in the United States as a tool for decision making between the requirements imposed mainly by the Department of Defense and Army weapons programs and so on.
It is a method of objects or alternatives evaluation. The purpose of a cost-effectiveness analysis is to determine which project / program or variant project / program can achieve its objectives at the lowest cost. A CEA is used to identify the most cost-efficient strategy from a plurality of variants which have similar results and to select
Given that a cost-effectiveness analysis (CEA) is closely related to a cost-benefit analysis (CBA) and that both are economic evaluations of alternative-resource use and cost-measures, INESAN uses them in the same manner as the evaluation of completed projects / programs.
INESAN is capable of using the CEA method for completed projects to compare different alternatives with similar objectives and to measure their effectiveness. It is also used in the assessment of the expected impacts of alternative measures before they are implemented (ex-ante) or to assess the effectiveness of measures already implemented (ex-post).
INESAN uses an ex-ante CEA at an early stage in the process of program / project to identify the most cost-effective options. INESAN works with assumptions and projections of costs and efficiency options in different contexts in order to predict the impact of future actions. On the other hand, ex-post CEA is specifically used for cases where the target was set to assess whether the program / project effectively solved.
The results of an CEA are often integrated into a multi-criteria analysis (MCA) - link - which allows the combination of different criteria for decision making in a variety of formats.
Costing (standard calculation) is an important subcategory of cost accounting. Costing and related variations is valuable tool for project management. If scattering occurs, management immediately recognize that the real cost is different from the planned / expected costs.
INESAN use this method as a complementary analysis within the CBA / CEA.
Return of Investment – ROI
ROI is a method that compares the actually achieved profit (or loss) with the initial cost of the investment. ROI analysis is one of the major and commonly used indicators of overall success / effectiveness of the project. Using this analysis, we can express the overall profitability of the project / investment or efficiency, this method can be used to compare the profitability of different investments. When comparing different investments is then preferred investments with the highest profitability. The achieved level of ROI is often compared with the required or expected rate of return on money invested.
ROI can be calculated also in the non-financial units. For example, economic, social and environmental impacts of investments, projects and activities allows you to identify the social return on investment (Social Return on Investment - SROI). This method is used for example in the evaluation of impacts on individual skateholders at identifying ways of improving performance and increasing efficiency investments. This method is typical for the bodies of the public or nonprofit sector. These entities typically do not implement projects in order to make a profit, but are intended to act on their surroundings.
INESAN this method is used in the context of the evaluation of the impact of corporate investment and also European subsidies on performance and economic situation of the organization. ROI is also used to compare and evaluate the profitability of the projects compared. Besides ROI, in terms of impact evaluation of corporate investments, the investment of public funds or European subsidies to the economic situation, the organization also used other indicators of profitability and other financial indicators.