Concept and types of efficiency of investment projects

In modern economic literature it is possible to meet various definitions of the concept " efficiency of the investment project ". Some experts treat it as a ratio of expenses and results, others define efficiency of the investment project, as category reflecting degree of compliance of the investment project to the purposes and interests of its participants. Implementation of effective projects increases arriving in the order of society a gross internal product which then shares between subjects participating in the project. Different types of efficiency of investment projects are defined by receipts and expenses of these subjects.

Methodical Recommendations about an assessment of efficiency of investment projects allocated the following types of efficiency of projects: - efficiency of the project as a whole

- efficiency of participation in the project.

Efficiency of the project as a whole is estimated for the purpose of determination of potential appeal of the project for possible participants and searches of sources of financing. Efficiency of participation in the project is defined for check of its financial feasibility, and also interest in it all its participants.

Exist as well other options of classification of types of efficiency of the investment project. One of the most interesting is the classification providing division of efficiency of the project on commercial and budgetary. This classification is based on that from what positions of level the investment project is estimated:

- macroeconomic (efficiency of participation of the state in the project from the point of view of the income and expenses of budgets of all levels) – is carried out an assessment of the budgetary efficiency;

- microeconomic (at the accounting of consequences of the project for the participant realizing the project) – the assessment of commercial effectiveness is carried out.

Commercial effectiveness of SP needs to be considered from two parties: financial efficiency of SP and economic efficiency of SP.

As the main indicators at an economic assessment of efficiency of the project it is necessary to allocate:

- net income;

- the net discounted income;

- internal standard of profitability;

- need for additional financing (other names - PF, the project cost, the risk capital);

- indexes of profitability of expenses and investments;

- payback period;

Calculation of indicators of commercial effectiveness of SP is based on the following principles:

• the provided project (market) current or expected food prices, services and material resources are used;

• cash flows pay off in the same currencies in which the project provides acquisition of resources and production payment;

• the salary joins in structure of operational expenses in the sizes established by the project (taking into account assignments);

• if the project provides at the same time both production and consumption of some production (for example, production and consumption of components or the equipment), in calculation are considered only costs of its production, but not expenses on its acquisition;

• at calculation taxes, collecting, assignments, etc., provided by the legislation, in particular, compensation of the VAT for the used resources established by the law tax privileges and so forth are considered;

• if the project provided full or partial binding of money (deposition, acquisition of securities and so forth), the investment of the corresponding sums is considered (in the form of outflow) in cash flows from investment activity, and receiving (in the form of inflows) - in cash flows from operating activities;

• if the project provides simultaneous implementation of several types of operating activities, in calculation expenses on each of them are considered.

As output forms for calculation of commercial effectiveness of the project tables are recommended:

- report on profits and on losses;

- expected balance of assets and liabilities;

- cash flows with calculation of indicators of efficiency.

For creation of the profit and loss report it is necessary to provide data on tax payments on each type of tax.

As the main financial streams at calculation of indicators of commercial effectiveness and any kind of efficiency in general it is necessary to allocate a cash flow from operational, from financial and from investment activity

The main inflow of real money from operating activities are the proceeds from sales of production defined on final (realized on the party) production, and also the other and non-operating income.

Into a cash flow from investment activity enter:

inflows - the income (minus taxes) from realization of property and intangible assets (in particular, at the project termination), and also from return (at the end of the project) current assets, reduction of working capital on all steps of the settlement period;

outflows - investments in fixed assets on all steps of the settlement period, liquidating expenses, investments of funds for the deposit and in securities of other managing subjects, in increase in working capital, compensation (at the end of the project) reverse liabilities.

The budgetary efficiency is estimated on request of bodies of the public and/or regional government. According to these requirements the budgetary efficiency for budgets of various levels or the consolidated budget can be defined.

The budgetary efficiency considers social and economic consequences of implementation of SP for society as a whole, including both direct results and project expenses, and "external": expenses and results in adjacent sectors of economy, ecological, social and other noneconomic effects.

From the point of view of the budgetary efficiency the project first of all has to be directed not on receiving profit, and on achievement of the greatest possible social and economic result. On an example in the SP analysis from knitted object with construction of welfare value (an example the theater can be), paramount value has that social effect which will be reached. However it isn't necessary to forget that the most preferable is that SP on which realization as little as possible expenses, taking into account social effect which needs to be reached is required.

Indicators of the budgetary efficiency (from the financial point of view) pay off on the basis of definition of a flow of budgetary funds.

Inflows of means for calculation of the budgetary efficiency treat:

- commission payments to RK Ministry of Finance for maintenance of the foreign credits (in the income of the federal budget);

- dividends on belonging region or the state to actions and other securities issued in connection with realization of SP.

Outflows of budgetary funds treat:

- granting budgetary (in particular, state) resources on the terms of fixing in property of appropriate authority of management (in particular, in federal state ownership) parts of actions of the joint-stock company created for implementation of SP;

- granting the budgetary resources in the form of the investment credit;

- providing budgetary funds on a gratuitous basis (subsidizing);

- the budgetary grants connected with carrying out a certain price policy and ensuring observance of certain social priorities.

It is separately recommended to consider:

- the tax privileges which are reflecting in reduction of receipts from taxes and fees. In this case outflows also don't arise, but inflows decrease;

- state guarantees of loans and investment risks. Outflows thus are absent. As additional inflow the payment for guarantees serves. At an assessment of efficiency of the project taking into account factors of uncertainty of outflow payments on guarantees join at approach of insured events.

At an assessment of the budgetary efficiency of the project changes of the income and expenses of the budgetary funds, caused by influence of the project on the third-party enterprises and the population if the project has on them impact are considered also, including:

- direct financing of the enterprises participating in realization of SP;

- change of tax revenues from the enterprises, which activity improves or worsens as a result of SP realization;

- payments of grants to the persons remaining without work in connection with implementation of the project (including when using the import equipment and materials instead of similar domestic);

- allocation from the budget of means for resettlement and employment of citizens in the cases provided by the project.

According to the projects providing creation of new workplaces in regions with high unemployment rate, in inflow of budgetary funds the economy of capital investments from the federal budget or the budget of the subject of Federation on payment of the corresponding grants is considered.

As an output form the table of a cash flow of the budget with definition of indicators of the budgetary efficiency is recommended. The main indicator of the budgetary efficiency is of the budget.In the presence of the budgetary outflows possibly definition of VND and budget IDES. In case of granting the state guarantees for the analysis and selection of independent projects at the set total size of guarantees along with (ChDDB) the index of profitability of guarantees (IPG) - the relation of to the size of guarantees (in case of need - discounted) can play an essential role also.

Basis for calculation of indicators of the budgetary efficiency are the sums of tax revenues of the budget and payments for budgets of the various levels, defined with addition of income tax on a salary.

On the basis of the obtained data cash flows for determination of the budgetary efficiency are formed and generalizing indicators of the budgetary efficiency of the project pay off. For each level of the budget calculations are carried out separately.

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