TECHNICAL ANALYSIS

WHAT IS AN TECHNICAL ANALYSIS ; When market demand exceeds supply the technical analysis is required .There are four major inquires are required for technical analysis. Availability of technology Transferability Resources availability Risk implications

1.AVAILABILITY OF TECNOLOGY
For running any project a good technology is required. before introducing any project the analyst should check whether any existing technology is associated with the project or not. Criteria for taking any technology for the project a. It should be matched with labour to capital ratio. b. Desired quality of a product and cost of the product Vs investment needed for a given technology

2.Transferability
Transferability means shifting of technology Two major factors have to taken care when there is any technological changes are made Political angle Operational angle

Technology is very sensitivity from the point of view of environment. Transfer of technology depends upon different factors so it is observed that sometimes it is had to transfer the technology. Adjustment and changes in a technology is warranted Any modification in technology has its impact on cost. There are some modification which are not feasible in nature they are discussed below. Normal capacity utilization Requirement of plant and equipment and fabrication facility Production process needed

Flexibility Possible product mix Rate of change Waste disposal problem

3 resources availability
Once the technology selected the quality of resources are also selected .At the time of changing technology it is difficult to fox a proper match. for example a coal roll mill (CRM) technology requires high quality coal with low moisture content and high carbon content. so as per the sensibility of coal technology is required.

4 Risk implication
Each technology has its fixed and consequential fixed and variable cost during operation. A technology that ensures in high fixed cost but low variable cost creates a higher degree of operating leverage. A higher degree of operating leverage would enlarge the effect of change in sales revenue on operating profits.

Financial analysis
Introduction: The final stage in project analysis if financial analysis. Market analysis and technological analysis provide sufficient information for forming reliable assumptions including investment needed in the project. Gestation period in the project construction, total sales revenue that can be generated, cost of different resources and so on. Some basic decisions are place before taking financial analysis.

FINANCIAL ANALYSIS To judge the project from the financial angle we need information about the following 1. Estimate of sales and production 2. Cost of production 3. Working capital requirement and it financing 4. Estimates of working results 5. Breakeven point 6. Projected cash flow statement 7. Projected balance sheet 8. Cost of project 9. Means of financing

Basic decisions
There are some basic decisions these are discussed below. Period of analysis: Period of analysis based on policy of the company .and it purely consideration factors like product life cycle, business cycle, rate of change in technology and test ,managerial ability to foresee in the future And data base available to support the forecast. Information technological projects planned for three hours due to technological development rate.

Project report for the purpose of loan prepared for the period of loan. If the length of analysis is less than the approximate project life it is appropriate the resale value of all asset at the end of the terminal period

Estimating working capital requirement

Working capital management is necessary from three point of view Precautionary point of view Transaction motive Speculative motive At the time of estimating working capital requirement following points should borne in mind The build up of current asset till the rated level of capacity utilization is reached The maximum permissible bank finance should be maintained and margin requirement against various current assets

Cost of project
The cost of the project represent sum of all items of outlay associated with projects which are supported by long term funds. it is the sum of outlay on the following Land and site development Building and civil work Plant and machinery Technical know how and engineers fee Expenses on foreign techniques Miscellaneous fixed asset

Means of financing
To meet the cost of the project the following sources of finance is required . Share capital Term loans Debenture capital Internal sources Miscellaneous sources To determine specific means of finance for a given project the following should be borne in mind Norms of regulatory body, key business considerations namely cost, risk, control ,flexibility

Estimate sales and production

Typically ,the starting point for profitability projections is the forecast for sales revenue. In estimating sales it is reasonable to assume that the capacity utilization would be somewhat low in the first year and rise thereafter gradually. to reach the maximum level

Cost of production
The major component of cost of production are Material cost ; comprises cost of raw material, chemicals components Utilization cost ; it is the sum of cost of power, water and fuel Labour cost; includes cost of manpower employed in the factory and factory overhead cost. ; the expenses on repairs and maintenance, rent taxes insurance on factory cost

Profitability projection
The profitability projection or estimates of working results are prepared along with following lines cost of production ,total administrative expenses, total sales revenue,royality and knowhow payable Expected sales, total financial expenses, depreciation, provision for taxation, dividend, retained profit,

Cash flow statement and balance sheet

The cash flow statement shows the movement of cash into and out of the firm and the impact of the cash balance with them. The balance sheet shows the position of the various asset and liabilities,