unit 1

concept of project-Simply put, a project is a series of tasks that need to be completed in order to reach a
specific outcome. A project can also be defined as a set of inputs and outputs required to achieve a
particular goal. Projects can range from simple to complex and can be managed by one person or a
hundred. Projects are often described and delegated by a manager or executive. They go over their
expectations and goals and it's up to the team to manage logistics and execute the project in a timely
manner. Sometimes deadlines can be given or a time limitation. For good project productivity, some
teams break the project up into individual tasks so they can manage accountability and utilize team
strength.

CATEGORIES OF PROJECT

(1) Manufacturing Projects:Where the final result is a vehicle, ship, aircraft, a piece of machinery etc.

(2) Construction Projects:

Resulting in the erection of buildings, bridges, roads, tunnels etc. Mining and petro-chemical projects can
be included in this group.

(3) Management Projects:Which include the organization or reorganization of work without necessarily
producing a tangible result. Examples would be the design and testing of a new computer software
package, relocation of a company’s headquarters or the production of a stage show.

(4) Research Projects:

In which the objectives may be difficult to establish, and where the results are unpredictable.

CONCEPT OF PROJECT MANAGMENT

Project Management is the art of managing all the aspects of a project from inception to closure using a
scientific and structured methodology. The term project may be used to define any endeavor that is
temporary in nature and with a beginning or an end. The project must create something unique whether
it is a product, service or result and must be progressively elaborated. As the definition implies, not
every task can be considered a project. It would be worthwhile to keep this definition in mind when
categorizing projects and studying their role in the success of the organization. With the above definition
of the project, one gets a clear idea on what a project is.
 Project management is about knowing exactly what your goals are, how you’re going to
achieve them, what resources you’ll need, and how long it will take you to reach that specific goal. In
fact, project management’s goal is to make sure that everyone involved in a project knows these and is
aware of the purpose of the project.

The “project manager” is in charge of the planning and execution of a project. He makes sure that
everything is following the client’s vision and quality standards. He will also be held accountable for the
project’s success or failure.

People have been “managing projects” for centuries. They went from using traditional tools such as pen
and paper to the use of advanced technologies. Currently, project managers employ the use of project
management tools to speed up and ease the entire work process.

TOOLS AND TECHNIQES OF PROJECT MANG.

In today’s day and age, project management is all about using the right tools and techniques. Having
these two things in order can help you manage your projects easily and effectively. It has been found in
many surveys that using the right project management tools and techniques can increase your overall
performance, productivity, and happiness-levels at work.

Project Management Tools

1. ProofHub

ProofHub is a versatile project management tool used by leading organizations like NASA, Disney, Taco
Bell and many more. This all-in-one tool that comes packed with powerful features to eliminate the need
of having too many different tools to run your business.

Features:

Online proofing software saves a lot of time during the feedback-sharing process

Makes task-management less stressful for teams

Get a visual picture of projects using Gantt charts in ProofHub

Also available as a mobile app for Android and iOS users.

2. LiquidPlanner
LiquidPlanner

LiquidPlanner is one of those project management software that is known to provide a better way to
plan and execute work. Interestingly, it offers a responsive approach to project management by treating
projects as living and evolving constructs.

Main features:

Project plans are built on priorities

Project schedules automatically predict finish dates

Data and statuses are accessible in real-time

Instantly visualize the impact of resource availability

3. Zoho Projects-Zoho Projects seem like a nice option if you’re looking for a free online project
management tool that lets you create and manage your projects on your own. It makes project
management easier by letting you plan, track, and collaborate in an effortless manner.

Main features:

Plan projects with ease

Get in-depth insights with Gantt charts

Promotes seamless collaboration

Integrate with apps such as Zapier, Slack, Dropbox etc

Read on: Zoho Alternatives – 13 Tools Your Team Will Love

4. BasecampBasecamp

Basecamp is a project management solution that has been there in the business for more than 10 years
and is still helping project managers to end their project management woes. If you are looking for a
simple interface and collaborative approach to manage projects, Basecamp might be the ideal choice for
you.

Top features:
Robust collaborative platform to send messages and quick suggestions

Create projects and teams with just a few clicks

Reports for overdue tasks, upcoming deadlines, to-dos and more

Create schedules that integrate with calendar apps

Mobile apps for iOS and Android

5. ClickUp-ClickUp is a top-rated project management tool helping project managers and teams to
become more productive than ever. As it focuses on effective task management, people from different
industries are using ClickUp for better work management. It has got a beautiful interface coupled with
powerful features that make it a must-have for teams handling too many projects at once.

Top features:

Offers three different views – List, Box, and Board view

Create your own custom statuses and workflows

With ‘Me’ dashboard see things that are related to you

Pricing: Available for free for up to 100MB, Premium for $5 user/month.

Let’s start with famous project management techniques and methodologies used by various
organizations and learn how these techniques can help your business to grow:

Techniques OF PROJECT MANGANGMENT-

1. Agile-Agile methodology is one of the most popular project management methodologies. It uses the
‘sprint approach’ where you can break a project in the form of sprints or cycles. As the word ‘agile’
means the ability to move quickly and responding swiftly to changes, likewise this methodology makes
way for flexibility and collaboration. It is extensively used in software development and is best suited
for small software projects that require frequent communication and the need to work together for
analyzing requirements and other aspects of a project.

2. Waterfall-This is one of the most simple and oldest project management techniques in project
management. It is also referred as Software Development Life Cycle (SDLC) that focuses on making a
solid plan and effective execution. The Waterfall methodology is sequential that means one task has to
be completed before the next starts in the pipeline. Here, all the requirements must be defined in the
beginning so that there is a proper planning and organization of a project plan.

3. Prince2-PRINCE2 is an acronym for Projects In Controlled Environments. It is a project management

methodology that is made up of principles and processes. Originated in the UK, Prince2 is quite a well-
put methodology in which a project is divided into multiple levels and stages each having its own set
of steps to be followed. This standardness enables it to be implemented in any organization
irrespective of its nature enabling them take the appropriate action for successful completion of
projects.

4. Scrum-Scrum is one of those methodologies that mainly focuses on improving communication,

teamwork, and speed of development in a project. In Scrum methodology, a team is often led by a
scrum master that is also called Subject Matter Expert (SME) making way for seamless collaboration
and encourages team members to deliver results. It was developed keeping in mind the needs of
software development teams but with the changing times, many teams are either using a derivative of
it or combine it with an another methodology.

5. Critical Chain Methodology-The idea of Critical Chain Methodology was introduced in 1997 in
Eliyahu M. Goldratt’s book, Critical Chain where he described the methodology as a method of
planning and managing projects that strives to keep resources levelled. It is different from other
methodologies in a way that it focuses on resources than on the method itself and makes sure that the
project plan is feasible enough and completed on time.

Apart from these methodologies, there is one more thing is equally important in project management
– project management tools and software. Many project managers consider these tools a deciding
factor that differentiates them from others.

forms of PROJECT ORGANISATION

Functional Organizational Structure

In a functional organizational structure, you would find the components of a hierarchy system where
authority-driven decisions on budget, schedule, and equipment rest on the shoulders of the functional
manager who possesses a significant level of expertise in the same field.
That is to say that the project manager, in this type of organization has little to no authority here; in
some functional organizations, that position does not even exist.

What would you find, however, is that the work is broken down into departments such as the human
resource department, sales department, finance, public relations, administration, etc.

In simple terms, it can be likened to that of a more traditional company where staff is presided over by
a supervisor, based on their functions within the organization and communication is most often done
through the department heads to senior management.

What is fascinating about this type of organizational structure is that employees appear to be more
skilled in their respective departments, thereby leading to greater work efficiency. Everyone knows
who to hold accountable if something were to go wrong as responsibilities are predetermined.

On the downside, the work may prove monotonous over time, which could result in less enthusiasm
and reduced loyalty to the organization. In addition to that, you would also find that cross-
departmental communication becomes poor and the high level of bureaucracy could affect decision-
making negatively.

Projectized Organizational Structure

The projectized organizational structure is the complete opposite of the functional organizational
structure even though the organization may still group staff according to their work functions.

In this case, the project management team structure is organized in such a way that the project
manager has project authority. He has jurisdiction over the project’s budget, schedule, and the project
team. You would find him at the top of the hierarchical structure, calling all the shots; with employees
playing supporting roles for the project. At the end of the project, the project team members are
released and resources directed towards more relevant areas.

What’s great about this kind of structure is that there is a clear, established line of authority; resulting
in faster decision-making and approval. Communication becomes easier and more effective and
project team members gain more experience working on different types of projects as the need for
them arises.

A major disadvantage to this type of organizational structure, however, would be that employees
could see themselves being under a lot of pressure most of the time, especially if they happen to work
on multiple projects at the same time. This often leads to poor communication amongst the team
members as everyone is left more or less playing “catch-up”.

Matrix Organizational Structure

The matrix organizational structure can be found lying somewhere between the functional
organizational structure and the projectized organizational structure depending on what type of
matrix structure is being run.

For instance, the strong matrix organizational structure has some similarities with that of a projectized
organizational structure in the sense that the project manager is responsible for a project. If the
organization is running a weak matrix structure, then the project authority would fall to the hands of a
functional manager – as it is in a functional organization. Interestingly enough, in a balanced matrix
organization, both the project manager and the functional manager shares equal authority for the
project.

If an organization finds itself working in a dynamic environment, then this might be the right structure
to run with it and it promotes greater efficiency, helping the organization respond to customer
demands or changes in the marketplace, faster.

This is easily achieved because while the project manager exhibits project authority in a horizontal
manner, the functional manager does so in a vertical, flowing downwards. For example, the project
manager could be responsible for handling project schedule or budget while the functional manager
would be responsible for outlining and distributing responsibilities, overseeing the performance of the
equipment, etc.

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CONCLUSION

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words, the question is...

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Forms of Project Organization

1. FORMS OF PROJECT ORGANIZATION Presented By:- Gautam Chopra Chaman Tanwar

2. PROJECT ORGANIZATION • To work on any project or business you need to have a proper project
organization & its structure. • Which includes Manpower, Machinery, Technology, Building,
Infrastructure, etc. • As they are the key factors for a successful commercialization of the project.

3. FORMS OF PROJECT ORGANIZATION FUCTIONAL ORGANIZATION DIVISIONAL ORGANIZATION

MATRIX ORGANIZATION PROJECTIZED ORGANIZATION

4. FUNCTIONAL ORGANIZATION • When activities are divided, on the basis of functions of the
organization, it is called ‘functional organization’. • This may allow recruitment of subject expertise but
at the same time it may result in a greater coordination problem causing lesser control due to chaos.

5. EXAMPLE : AIRTEL

6. DIVISIONAL ORGANIZATION • This structure is for HIGHLY DIVERSIFIED & DESPERSED firms in terms
of geographical areas/ product/ market. • A divisional organizational structure usually consists of
several parallel teams focusing on a single product or service line. • In a divisional structure, an
organization is divided into various divisions where people with diverse skills are kept together in the
form of groups by a similar product, service or geographic location, and each division itself is capable
of doing the task on its own. Each division has its own resources required to function properly. • The
division can be based on product, service or the geographical area: e.g. :- ITC

7. EXAMPLE • General Electrics. It can have microwave division, turbine division, etc., and these
divisions have their own marketing teams, finance teams, etc.

8. MATRIX ORGANIZATION • When it comes to matrix structure, the organization places the
employees based on the function and the product. • The matrix structure gives the best of the both
worlds of functional and divisional structures. • The company uses teams to complete tasks • The
teams are formed based on the functions they belong to and product they are involved in
9. STARBUCKS • Starbucks has rearranged their organizational structure to better accommodate
customer satisfaction. The CEO of Starbucks announced expansion of their matrix organizational
structure last month.

10. PROJECTIZED ORGANIZATION • In projectized organizations, arrange their activities into programs
or portfolios, and implement them through the projects. • Here, the project manager is in charge of
his project, and he has full authority over it. Everyone in his team reports to him. The projectized
organization structure is opposite to the functional organization structure. Here, either there will be
no functional manager, or if he exists, he will have a very limited role and authority. • The project
manager controls the budget, resource, and work assignment.

UNIT 2

PROJECT IDENTIFICATION-LinkedIn SlideShare

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CONCLUSION

• After all the previously cited, we can put the question what model to choose. In other

words, the question is...

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Forms of Project Organization

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Gautam Chopra

Gautam Chopra, Student of RNB Global University

Follow

Published on Aug 13, 2017

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Forms of Project Organization

1. FORMS OF PROJECT ORGANIZATION Presented By:- Gautam Chopra Chaman Tanwar

2. PROJECT ORGANIZATION • To work on any project or business you need to have a proper project
organization & its structure. • Which includes Manpower, Machinery, Technology, Building,
Infrastructure, etc. • As they are the key factors for a successful commercialization of the project.

3. FORMS OF PROJECT ORGANIZATION FUCTIONAL ORGANIZATION DIVISIONAL ORGANIZATION

MATRIX ORGANIZATION PROJECTIZED ORGANIZATION

4. FUNCTIONAL ORGANIZATION • When activities are divided, on the basis of functions of the
organization, it is called ‘functional organization’. • This may allow recruitment of subject expertise but
at the same time it may result in a greater coordination problem causing lesser control due to chaos.
5. EXAMPLE : AIRTEL

6. DIVISIONAL ORGANIZATION • This structure is for HIGHLY DIVERSIFIED & DESPERSED firms in terms
of geographical areas/ product/ market. • A divisional organizational structure usually consists of
several parallel teams focusing on a single product or service line. • In a divisional structure, an
organization is divided into various divisions where people with diverse skills are kept together in the
form of groups by a similar product, service or geographic location, and each division itself is capable
of doing the task on its own. Each division has its own resources required to function properly. • The
division can be based on product, service or the geographical area: e.g. :- ITC

7. EXAMPLE • General Electrics. It can have microwave division, turbine division, etc., and these
divisions have their own marketing teams, finance teams, etc.

8. MATRIX ORGANIZATION • When it comes to matrix structure, the organization places the
employees based on the function and the product. • The matrix structure gives the best of the both
worlds of functional and divisional structures. • The company uses teams to complete tasks • The
teams are formed based on the functions they belong to and product they are involved in

9. STARBUCKS • Starbucks has rearranged their organizational structure to better accommodate

customer satisfaction. The CEO of Starbucks announced expansion of their matrix organizational
structure last month.

10. PROJECTIZED ORGANIZATION • In projectized organizations, arrange their activities into programs
or portfolios, and implement them through the projects. • Here, the project manager is in charge of
his project, and he has full authority over it. Everyone in his team reports to him. The projectized
organization structure is opposite to the functional organization structure. Here, either there will be
no functional manager, or if he exists, he will have a very limited role and authority. • The project
manager controls the budget, resource, and work assignment.Project Identification

project identification

With the clear idea of projects in mind, let’s now see how the feasible projects can be identified. The
prospective entrepreneur may have a number of fertile project ideas. He may come across several
investment opportunities. However, after preliminary evaluation, he has to select the most feasible
and promising project. The proper identification and selection of a project ensures success of an
enterprise. Project identification is the first step of starting a new nature but it is a difficult task.

In simple words project identification means a process of finding out the most appropriate project
from among the several investment opportunities According to Dr. Vasant Desai the project
identification is concerned with the collection, compilation and analysis of economic data for the
eventual purpose of locating possible opportunities for investment.
Conceiving project ideas

This is the first important stage in project identification. Profit making is the chief drive behind every
business / enterprise. Therefore the prospective entrepreneur has to search for a sound business idea,
which can generate reasonable profit for him. For that, he has to screen keenly the socio-economic,
cultural, legal and market environments. After conceiving the business idea, he gives a practical shape
to his idea. You would perhaps remember that the business idea of giving readymade flavour of ‘paan’
like paanpatti to the customers was first conceived by Madanlal Kothari. He didn’t have business
background but he pioneered PanParag- PanMasala industry. Shahnaz Husain, an ordinary woman
from conservative Muslim family successfully placed the Indian herbals on the world’s cosmetic map,
pioneered the Harbal Cosmetics. Likewise, the idea of water proof band-aid and sanitary napkins (for
women) were conceived by Johnson and Johnson. The Talwalkar’s and VLCC found sound business
idea in physical fitness industry.

Choosing the right line of business

The second important step in project identification is choosing the right line of business. To ensure the
success of business, the prospective entrepreneur has to spend considerable time and energy on
choosing the right line of activities. While doing so he has to examine the business potential of his
ideas. For that he has to

1*study the environment / marketability of the product/service.

2*nature, extent, trend of demand for the product or service proposed to be manufactured/rendered

3*composition and pattern of potential users of the product or service

4*extent and intensity of competition in proposed area of business

5*procurement and uninterrupted availability of required raw materials and human resource

3*Opportunity seeking

An entrepreneur is basically an opportunity seeker. A number business opportunities may be available,

however, seeking the right business opportunity depends upon the entrepreneur’s capabilities, his
strengths and weaknesses and also on his preferences. Identification of appropriate business
opportunity requires specialized skills. Before coming to the final decision, he has to explore and analyze
all possible opportunities. For seeking the best business opportunity, the following explorations may be
useful.

Environment exploration -This means the study of different environmental factors. The study of
demographic environment includes the in-depth study of growth rate of population, age-composition,
sex-composition, occupational- pattern, and income-composition etc. Low infant mortality rate and high
birth rate ensures the increasing demand for baby-soap, baby hair oil, gripe-water, toys and kids wear
etc. Socio-economic conditions, culture, basic features of resources etc are also studied.

Present business exploration - This relates to the study of present pattern of business activities, the study
of the consumption pattern, the study of emerging trends in the pattern of trading and consumption and
the pattern of demand.

Technology exploration - It is the study of new business opportunities created by change in technology
For example, in case of printing industry, traditional system of printing has gone and computer based
multi-colour printing opportunities have emerged It is also concerned with anticipation of new business
opportunities likely to emerge as a result of impact of technological advancement.

PROJECT FORMULATION

Project formulation is the systematic development of a project idea for arriving at an investment
decision. It has the built-in mechanism of ringing the danger bell at the earliest possible stage of
resource utilization. Project formulation is a process involving the joint efforts of a team of experts. Each
member of the team should be familiar with the broad strategy, objectives & other ingredients of the
project. Besides being an expert in his area of specialization, he should be able to play his role in the
overall scheme of things.

It aims at a systematic analysis of project potential with the ultimate objective of arriving at an
investment decision. In this process it makes an objective assessment from all possible angles starting
from project identification upto its appraisal stage. Thus, project formulation is the process of examining
technical, economic, financial & commercial aspects of a project. It refers to a preliminary project
analysis covering all aspects such as technical, financial, commercial, economic & managerial to find out
whether it is worthwhile to take project for detailed investigation & evaluation.

Market Survey Definition

Market survey is the survey research and analysis of the market for a particular product/service which
includes the investigation into customer inclinations. A study of various customer capabilities such as
investment attributes and buying potential. Market surveys are tools to directly collect feedback from
the target audience to understand their characteristics, expectations, and requirements.

Marketers develop new and exciting strategies for upcoming products/services but there can be no
assurance about the success of these strategies. For these to be successful, marketers should determine
the category and features of products/services that the target audiences will readily accept. By doing so,
the success of a new avenue can be assured. Most marketing managers depend on market surveys to
collect information that would catalyze the market research process. Also, the feedback received from
these surveys can be contributory in product marketing and feature enhancement.

Market surveys collect data about a target market such as pricing trends, customer requirements,
competitor analysis, and other such details.

Purpose of Market Survey

Gain critical customer feedback: The main purpose of the market survey is to offer marketing and
business managers a platform to obtain critical information about their consumers so that existing
customers can be retained and new ones can be got onboard.

Understand customer inclination towards purchasing products: Details such as whether the customers
will spend a certain amount of money for their products/services, inclination levels among customers
about upcoming features or products, what are their thoughts about the competitor products etc.

Enhance existing products and services: A market survey can also be implemented with the purpose of
improving existing products, analyze customer satisfaction levels along with getting data about their
perception of the market and build a buyer persona using information from existing clientele database.

Make well-informed business decisions: Data gathered using market surveys is instrumental in making
major changes in the business which reduces the degree of risks involved in taking important business
decisions

Demand Forecasting

It is a technique for estimation of probable demand for a product or services in the future. It is based on
the analysis of past demand for that product or service in the present market condition. Demand
forecasting should be done on a scientific basis and facts and events related to forecasting should be
considered.

Therefore, in simple words, we can say that after gathering information about various aspect of the
market and demand based on the past, an attempt may be made to estimate future demand. This
concept is called forecasting of demand.
For example, suppose we sold 200, 250, 300 units of product X in the month of January, February, and
March respectively. Now we can say that there will be a demand for 250 units approx. of product X in the
month of April, if the market condition remains the same.

Usefulness of Demand Forecasting

Demand plays a vital role in the decision making of a business. In competitive market conditions, there is
a need to take correct decision and make planning for future events related to business like a sale,
production, etc. The effectiveness of a decision taken by business managers depends upon the accuracy
of the decision taken by them.

Demand is the most important aspect for business for achieving its objectives. Many decisions of
business depend on demand like production, sales, staff requirement, etc. Forecasting is the necessity of
business at an international level as well as domestic level.

Demand forecasting reduces risk related to business activities and helps it to take efficient decisions. For
firms having production at the mass level, the importance of forecasting had increased more. A good
forecasting helps a firm in better planning related to business goals.

There is a huge role of forecasting in functional areas of accounting. Good forecast helps in appropriate
production planning, process selection, capacity planning, facility layout planning, and inventory
management, etc.

Demand forecasting provides reasonable data for the organization’s capital investment and expansion
decision. It also provides a way for the formulation of suitable pricing and advertisement strategies.

Following is the significance of Demand Forecasting:

Fulfilling objectives of the business

Preparing the budget

Taking management decision

Evaluating performance etc.

Moreover, forecasting is not completely full of proof and correct. It thus helps in evaluating various
factors which affect demand and enables management staff to know about various forces relevant to the
study of demand behavior.

The Scope of Demand Forecasting

The scope of demand forecasting depends upon the operated area of the firm, present as well as what is
proposed in the future. Forecasting can be at an international level if the area of operation is
international. If the firm supplies its products and services in the local market then forecasting will be at
local level.

The scope should be decided considering the time and cost involved in relation to the benefit of the
information acquired through the study of demand. Cost of forecasting and benefit flows from such
forecasting should be in a balanced manner.

UNIT 3

MEANS OF FINANCING-Financing means asking any financial institution (bank, credit union, finance
company) or another person to lend you money that you promise to repay at some point in the future. In
other words, when you buy a car, if you do not have all the cash for it, the dealer will look for a bank that
will finance it for you. Upon approval, the bank will pay the car dealer the money for the car, and then
they will send you a bill each month. The bank will lend you this money if you agree to pay interest on
top of the money lent to you. In other words, financing is borrowing money with a promise to repay that
money and some additional fee, or interest, over a period of time.

ESTIMATES OF COST

What Is Cost Estimation in Project Management?

A project lives and dies by its budget. Just think: a project can only come together with all the
necessary materials and labor, and those materials and labors cost money. And in this new economic
reality, businesses are looking to pay less and less for those materials and labor while maintaining—or
even increasing—quality and scope. So how do you put together a budget that will bring the project to
fruition while keeping costs to a minimum? That’s why proper cost estimation is important.

Cost estimation in project management is the process of forecasting the financial and other resources
needed to complete a project within a defined scope. Cost estimation accounts for each element
required for the project—from materials to labor—and calculates a total amount that determines a
project’s budget. An initial cost estimate can determine whether an organization greenlights a project,
and if the project moves forward, the estimate can be a factor in defining the project’s scope. If the
cost estimation comes in too high, an organization may decide to pare down the project to fit what
they can afford. (It is also required to begin securing funding for the project.) Once the project is in
motion, the cost estimate is used to manage all of its affiliated costs in order to keep the project on
budget.

Elements of cost estimation in project management

There are two key types of costs addressed by the cost estimation process:

Direct costs: These are the costs associated with a single area, such as a department or this particular
project itself. Examples of direct costs include fixed labor, materials and equipment.

Indirect costs: These are costs incurred by the organization at large, such as utilities and quality
control.

Within these two categories, some typical elements that a cost estimation will take into account
include:

Labor: the cost of project team members working on the project, both in terms of wages and time.

Materials and equipment: The cost of resources required for the project, from physical tools to
software to legal permits.

Facilities: the cost of using any working spaces not owned by the organization.

Vendors: the cost of hiring third-party vendors or contractors.

Risk: the cost of any contingency plans implemented to reduce risk.

FINANCIAL PROJECTIONS

Planning out and working on your company's financial projections each year could be one of the most
important things you do for your business. The results--the formal projections--are often less
important than the process itself. If nothing else, strategic planning allows you to "come up for air"
from the daily problems of running the company, take stock of where your company is, and establish a
clear course to follow.

Regular planning also helps your company deal with change, both inside and outside the company. By
constantly reevaluating your company's strengths, markets and competition, you're better able to
recognize problems and opportunities. You can react to new developments, rather than simply
plugging along.

But what keeps it from just being a number-crunching exercise? Here are three good reasons to
project your financials:

First, the financial plan translates your company's goals into specific targets. It clearly defines what a
successfully outcome entails. The plan isn't merely a prediction; it implies a commitment to making
the targeted results happen and establishes milestones for gauging progress.

Second, the plan provides you with a vital feedback-and-control tool. Variances from projections
provide early warning of problems. And when variances occur, the plan can provide a framework for
determining the financial impact and the effects of various corrective actions.

Third, the plan can anticipate problems. If rapid growth creates a cash shortage due to investment in
receivables and inventory, the forecast should show this. If next year's projections depend on certain
milestones this year, the assumptions should spell this out.

Depending on your company's situation and objectives, you'll need to develop several types of
projections and budgets:

A model that projects either the current year or a rolling 12-month period by month. This type of
forecast should be updated at least monthly and become the main planning and monitoring vehicle.
Information in this model can be the springboard for preparing the other types of plans discussed
below.

A long-range, strategic plan looking out three to five years. While the 12-month forecast often reflects
short-term expectation and tactical plans, the long-range projection incorporates the strategic goals of
the company. For startup companies, the initial business plan should include a month-by-month
projection for the first year, followed by annual projections going out a minimum of three years. Some
investors may prefer to see the second year broken out by quarters. It's fine to append the projections
for years two and beyond to the 12-month forecast, but the numbers should be more than just a
simple extrapolation of the current year. A strategic planning process should accompany development
of the "out year" projections.

Budgets, typically covering one year. Budgets translate goals into detailed actions and interim targets.
Budgets should provide details, such as specific staffing plans and line-item expenditures. Given the
detail required, the size of a company may determine whether the same model used to prepare the
12-month forecast can be appropriate for budgeting. In any case, unlike the 12-month forecast,
budgets should generally be frozen at the time they are approved. They should also be consistent with
the goals of the long-range plan.

Cash forecasts. These break down the budget and 12-month forecast into even further detail. The
focus is on cash flow, rather than accounting profit, and periods may be as short as a week in order to
capture fluctuations within a month.

All projections should be broken out by months for at least one year. If you choose to include
additional years, they generally do not need to be any more detailed than by quarters for another year
and then annually after that.

The projections should include an income statement and a balance sheet. Expenses can be
summarized by department or major expense category; you can hold line-item detail for the budget.
Cash needs should be clearly identified, possibly by adding a separate statement of cash flows. If your
financial statements usually report financial rations or expenses as a percent of sales, calculate and
report these as part of the projections, too.

ARR(Accounting rate of return)

Accounting rate of return, also known as the Average rate of return, or ARR is a financial ratio used in
capital budgeting.[1] The ratio does not take into account the concept of time value of money. ARR
calculates the return, generated from net income of the proposed capital investment. The ARR is a
percentage return. Say, if ARR = 7%, then it means that the project is expected to earn seven cents out of
each dollar invested (yearly). If the ARR is equal to or greater than the required rate of return, the
project is acceptable. If it is less than the desired rate, it should be rejected. When comparing
investments, the higher the ARR, the more attractive the investment. More than half of large firms
calculate ARR when appraising projects.

The key advantage of ARR is that it is easy to compute and understand. The main disadvantage of ARR is
that it disregards the time factor in terms of time value of money or risks for long term investments. The
ARR is built on evaluation of profits and it can be easily manipulated with changes in depreciation
methods. The ARR can give misleading information when evaluating investments of different size

ARR=AVERRAGE RATE DURING PERIOD/AVGERAGE INVESTIMENT

What Is the Accounting Rate of Return – ARR?

The accounting rate of return (ARR) is the percentage rate of return expected on investment or asset as
compared to the initial investment cost. ARR divides the average revenue from an asset by the
company's initial investment to derive the ratio or return that can be expected over the lifetime of the
asset or related project. ARR does not consider the time value of money or cash flows, which can be an
integral part of maintaining a business.
 How to Calculate the Accounting Rate of Return – ARR

Calculate the annual net profit from the investment, which could include revenue minus any annual
costs or expenses of implementing the project or investment.

If the investment is a fixed asset such as property, plant, or equipment, subtract any depreciation
expense from the annual revenue to achieve the annual net profit.

Divide the annual net profit by the initial cost of the asset, or investment. The result of the calculation
will yield a decimal. Multiply the result by 100 to show the percentage return as a whole number.

What Does ARR Tell You?

The accounting rate of return is a capital budgeting metric useful for a quick calculation of an
investment's profitability. ARR is used mainly as a general comparison between multiple projects to
determine the expected rate of return from each project.

ARR can be used when deciding on an investment or an acquisition. It factors in any possible annual
expenses or depreciation expense that's associated with the project. Depreciation is an accounting
process whereby the cost of a fixed asset is spread out, or expensed, annually during the useful life of
the asset.

Depreciation is a helpful accounting convention that allows companies not to have to expense the entire
cost of a large purchase in year one, thus allowing the company to earn a profit from the asset right
away, even in its first year of service. In the ARR calculation, depreciation expense and any annual costs
must be subtracted from annual revenue to yield the net annual profit.

Net Present Value (NPV)

What is Net Present Value (NPV)?

Net present value (NPV) is the difference between the present value of cash inflows and the present
value of cash outflows over a period of time. NPV is used in capital budgeting and investment planning to
analyze the profitability of a projected investment or project.

The following formula is used to calculate NPV:

\begin{aligned} &NPV = \sum_{t = 1}^n \frac { R_t }{ (1 + i)^t } \\ &\textbf{where:} \\ &R_t=\text{Net
cash inflow-outflows during a single period }t \\ &i=\text{Discount rate or return that could be earned in}
\\ &\text{alternative investments} \\ &t=\text{Number of timer periods} \\ \end{aligned}

NPV=

t=1

(1+i)

where:

=Net cash inflow-outflows during a single period t

i=Discount rate or return that could be earned in

alternative investments

t=Number of timer periods

If you are unfamiliar with summation notation – here is an easier way to remember the concept of NPV:

\begin{aligned} &\textit{NPV} = \text{TVECF} - \text{TVIC} \\ &\textbf{where:} \\ &\text{TVECF} = \

text{Today's value of the expected cash flows} \\ &\text{TVIC} = \text{Today's value of invested cash} \\ \
end{aligned}

NPV=TVECF−TVIC

where:

TVECF=Today’s value of the expected cash flows

TVIC=Today’s value of invested cash

A positive net present value indicates that the projected earnings generated by a project or investment -
in present dollars - exceeds the anticipated costs, also in present dollars. It is assumed that an
investment with a positive NPV will be profitable, and an investment with a negative NPV will result in a
net loss. This concept is the basis for the Net Present Value Rule, which dictates that only investments
with positive NPV values should be considered.

How to Calculate Net Present Value (NPV)

Money in the present is worth more than the same amount in the future due to inflation and to earnings
from alternative investments that could be made during the intervening time. In other words, a dollar
earned in the future won’t be worth as much as one earned in the present. The discount rate element of
the NPV formula is a way to account for this.

For example, assume that an investor could choose a $100 payment today or in a year. A rational
investor would not be willing to postpone payment. However, what if an investor could choose to receive
$100 today or $105 in a year? If the payer was reliable, that extra 5% may be worth the wait, but only if
there wasn’t anything else the investors could do with the $100 that would earn more than 5%.
An investor might be willing to wait a year to earn an extra 5%, but that may not be acceptable for all
investors. In this case, the 5% is the discount rate which will vary depending on the investor. If an
investor knew they could earn 8% from a relatively safe investment over the next year, they would not
be willing to postpone payment for 5%. In this case, the investor’s discount rate is 8%.

A company may determine the discount rate using the expected return of other projects with a similar
level of risk or the cost of borrowing money needed to finance the project. For example, a company may
avoid a project that is expected to return 10% per year if it costs 12% to finance the project or an
alternative project is expected to return 14% per year.

Imagine a company can invest in equipment that will cost $1,000,000 and is expected to generate
$25,000 a month in revenue for five years. The company has the capital available for the equipment and
could alternatively invest it in the stock market for an expected return of 8% per year. The managers feel
that buying the equipment or investing in the stock market are similar risks.

Internal Rate of Return – IRR

What Is Internal Rate of Return – IRR?

The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of
potential investments. The internal rate of return is a discount rate that makes the net present value
(NPV) of all cash flows from a particular project equal to zero. IRR calculations rely on the same
formula as NPV does.

Formula and Calculation for IRR

It is important for a business to look at the IRR as the plan for future growth and expansion. The
formula and calculation used to determine this figure follows.

\begin{aligned} &\text{0}=\text{NPV}=\sum_{t=1}^{T}\frac{C_t}{\left(1+IRR\right)^t}-C_0\\ &\

textbf{where:}\\ &C_t=\text{Net cash inflow during the period t}\\ &C_0=\text{Total initial
investment costs}\\ &IRR=\text{The internal rate of return}\\ &t=\text{The number of time periods}\\
\end{aligned}

0=NPV=

t=1

(1+IRR)

−C

where:

=Net cash inflow during the period t

=Total initial investment costs

IRR=The internal rate of return

t=The number of time periods

To calculate IRR using the formula, one would set NPV equal to zero and solve for the discount rate (r),
which is the IRR. Because of the nature of the formula, however, IRR cannot be calculated analytically
and must instead be calculated either through trial-and-error or using software programmed to
calculate IRR.

Generally speaking, the higher a project's internal rate of return, the more desirable it is to undertake.
IRR is uniform for investments of varying types and, as such, IRR can be used to rank multiple
prospective projects on a relatively even basis. Assuming the costs of investment are equal among the
various projects, the project with the highest IRR would probably be considered the best and be
undertaken first.

IRR is sometimes referred to as "economic rate of return" or "discounted cash flow rate of return." The
use of "internal" refers to the omission of external factors, such as the cost of capital or inflation, from
the calculation

What Does IRR Tell You?

You can think of the internal rate of return as the rate of growth a project is expected to generate.
While the actual rate of return that a given project ends up generating will often differ from its
estimated IRR, a project with a substantially higher IRR value than other available options would still
provide a much better chance of strong growth.

One popular use of IRR is comparing the profitability of establishing new operations with that of
expanding existing ones. For example, an energy company may use IRR in deciding whether to open a
new power plant or to renovate and expand a previously existing one. While both projects are likely to
add value to the company, it is likely that one will be the more logical decision as prescribed by IRR.

IRR is also useful for corporations in evaluating stock buyback programs. Clearly, if a company
allocates a substantial amount to a stock buyback, the analysis must show that the company's own
stock is a better investment (has a higher IRR) than any other use of the funds for other capital
projects, or higher than any acquisition candidate at current market prices.
 Social cost-benefit analysis

Social cost-benefit analysis is a systematic and cohesive economic tool(method) to survey all the
impacts caused by an urban development project[1]. It comprises not just the financial effects
(investment costs, direct benefits like tax and fees, et cetera), but all the social effects, like: pollution,
safety, indirect (labour) market, legal aspects, et cetera. The main aim of a social cost-benefit analysis
is to attach a price to as many effects as possible in order to uniformly weigh the above-mentioned
heterogeneous effects. As a result, these prices reflect the value a society attaches to the caused
effects, enabling the decision maker to form a statement about the net social welfare effects of a
project.

Risk Analysis

What Is Risk Analysis?

Risk analysis is the process of assessing the likelihood of an adverse event occurring within the
corporate, government, or environmental sector. Risk analysis is the study of the underlying
uncertainty of a given course of action and refers to the uncertainty of forecasted cash flow streams,
the variance of portfolio or stock returns, the probability of a project's success or failure, and possible
future economic states. Risk analysts often work in tandem with forecastUnderstanding Risk Analysis

A risk analyst starts by identifying what could go wrong. The negative events that could occur are then
weighed against a probability metric to measure the likelihood of the event occurring. Finally, risk
analysis attempts to estimate the extent of the impact that will be made if the event happens.

Quantitative Risk Analysis

Risk analysis can be quantitative or qualitative. Under quantitative risk analysis, a risk model is built
using simulation or deterministic statistics to assign numerical values to risk. Inputs that are mostly
assumptions and random variables are fed into a risk model.

For any given range of input, the model generates a range of output or outcome. The model is
analyzed using graphs, scenario analysis, and/or sensitivity analysis by risk managers to make
decisions to mitigate and deal with the risks.
A Monte Carlo simulation can be used to generate a range of possible outcomes of a decision made or
action taken. The simulation is a quantitative technique that calculates results for the random input
variables repeatedly, using a different set of input values each time. The resulting outcome from each
input is recorded, and the final result of the model is a probability distribution of all possible
outcomes. The outcomes can be summarized on a distribution graph showing some measures of
central tendency such as the mean and median, and assessing the variability of the data through
standard deviation and variance.

The outcomes can also be assessed using risk management tools such as scenario analysis and
sensitivity tables. A scenario analysis shows the best, middle, and worst outcome of any event.
Separating the different outcomes from best to worst provides a reasonable spread of insight for a risk
manager.

For example, an American Company that operates on a global scale might want to know how its
bottom line would fare if the exchange rate of select countries strengthens. A sensitivity table shows
how outcomes vary when one or more random variables or assumptions are changed. A portfolio
manager might use a sensitivity table to assess how changes to the different values of each security in
a portfolio will impact the variance of the portfolio. Other types of risk management tools include
decision trees and break-even analysis.

Qualitative Risk Analysis

Qualitative risk analysis is an analytical method that does not identify and evaluate risks with
numerical and quantitative ratings. Qualitative analysis involves a written definition of the
uncertainties, an evaluation of the extent of the impact (if the risk ensues), and countermeasure plans
in the case of a negative event occurring.

Examples of qualitative risk tools include SWOT Analysis, Cause and Effect diagrams, Decision Matrix,
Game Theory, etc. A firm that wants to measure the impact of a security breach on its servers may use
a qualitative risk technique to help prepare it for any lost income that may occur from a data breach.

While most investors are concerned about downside risk, mathematically, the risk is the variance
both to the downside and the upside.

Almost all sorts of large businesses require a minimum sort of risk analysis. For example, commercial
banks need to properly hedge foreign exchange exposure of overseas loans while large department
stores must factor in the possibility of reduced revenues due to a global recession. It is important to
know that risk analysis allows professionals to identify and mitigate risks, but not avoid them
completely.ing professionals to minimize future negative unforeseen effects.

unit 4

Definition

Project appraisal is the structured process of assessing the viability of a project or proposal. It involves
calculating the feasibility of the project before committing resources to it. It is a tool that company’s use
for choosing the best project that would help them to attain their goal. Project appraisal often involves
making comparison between various options and this done by making use of any decision technique or
economic appraisal technique.

Project appraisal is a tool which is also used by companies to review the projects completed by it. This is
done to know the effect of each project on the company. This means that the project appraisal is done to
know, how much the company has invested on the project and in return how much it is gaining from it.

Sensitivity Analysis

A sensitivity analysis determines how different values of an independent variable affect a particular
dependent variable under a given set of assumptions. In other words, sensitivity analyses study how
various sources of uncertainty in a mathematical model contribute to the model's overall uncertainty.
This technique is used within specific boundaries that depend on one or more input variables.

Sensitivity analysis is used in the business world and in the field of economics. It is commonly used by
financial analysts and economists, and is also known as a what-if analysis.

How Sensitivity Analysis Works

Sensitivity analysis is a financial model that determines how target variables are affected based on
changes in other variables known as input variables. This model is also referred to as what-if or
simulation analysis. It is a way to predict the outcome of a decision given a certain range of variables.
By creating a given set of variables, an analyst can determine how changes in one variable affect the
outcome.

Both the target and input—or independent and dependent—variables are fully analyzed when
sensitivity analysis is conducted. The person doing the analysis looks at how the variables move as
well as how the target is affected by the input variable.

Sensitivity analysis can be used to help make predictions in the share prices of public companies.
Some of the variables that affect stock prices include company earnings, the number of shares
outstanding, the debt-to-equity ratios (D/E), and the number of competitors in the industry. The
analysis can be refined about future stock prices by making different assumptions or adding different
variables. This model can also be used to determine the effect that changes in interest rates have on
bond prices. In this case, the interest rates are the independent variable, while bond prices are the
dependent variable.

Example of Sensitivity Analysis

Assume Sue is a sales manager who wants to understand the impact of customer traffic on total sales.
She determines that sales are a function of price and transaction volume. The price of a widget is
$1,000, and Sue sold 100 last year for total sales of $100,000. Sue also determines that a 10% increase
in customer traffic increases transaction volume by 5%. This allows her to build a financial model and
sensitivity analysis around this equation based on what-if statements. It can tell her what happens to
sales if customer traffic increases by 10%, 50%, or 100%. Based on 100 transactions today, a 10%, 50%,
or 100% increase in customer traffic equates to an increase in transactions by 5%, 25%, or 50%
respectively. The sensitivity analysis demonstrates that sales are highly sensitive to changes in
customer traffic.

unit 5

What Is Project Scheduling?

Project scheduling is a mechanism to communicate what tasks need to get done and which
organizational resources will be allocated to complete those tasks in what timeframe. A project schedule
is a document collecting all the work needed to deliver the project on time.
But when it comes to creating a project schedule, well, that’s something few have deep experience with.

What and who is being scheduled, and for what purposes, and where is this scheduling taking place,
anyway?

A project is made up of many tasks, and each task is given a start and end (or due date), so it can be
completed on time. Likewise, people have different schedules, and their availability and vacation or leave
dates need to be documented in order to successfully plan those tasks.

Whereas people in the past might have printed calendars on a shared wall in the water-cooler room, or
shared spreadsheets via email, today most teams use online project scheduling tools. Typically, project
scheduling is just one feature within a larger project management software solution, and there are many
different places in the software where scheduling takes place.

For example, most tools have task lists, which enable the manager to schedule multiple tasks, their due
dates, sometimes the planned effort against that task, and then assign that task to a person. The
software might also have resource scheduling, basically the ability to schedule the team’s availability, but
also the availability of non-human resources like machines or buildings or meeting rooms.

Because projects have so many moving parts, and are frequently changing, project scheduling software
automatically updates tasks that are dependent on one another, when one scheduled task is not
completed on time. It also generates automated email alerts, so team members know when their
scheduled tasks are due or overdue, and to let the manager know when someone’s availability has
changed.

Project scheduling is simple when managed online, thankfully, especially since the software does all the
hard part for you!

How to Schedule a Project

Before going deeper into project scheduling, let’s review the fundamentals to project scheduling. Project
scheduling occurs during the planning phase of the project. You have to ask yourself three questions to
start:
1. What needs to be done?

2. When will it be done?

3. Who will do it?

Once you’ve got answers to these questions, then you can begin to plan dates, link activities, set the
duration, milestones and resources. The following are the steps needed to schedule a project:

Define Activities

What are the activities that you have to do in the project? By using a Work Breakdown Structure (WBS)
and a deliverables diagram, you can begin to take these activities and organize them by mapping out the
tasks necessary to complete them in an order than makes sense.

Do Estimates

Now that you have the activities defined and broken down into tasks, you next have to determine the
time and effort it will take to complete them. This is an essential piece of the equation in order to
calculate the correct schedule.

Determine Dependencies

Tasks are not an island, and often one cannot be started until the other is completed. That’s called a task
dependency, and your schedule is going to have to reflect these linked tasks. One way to do this is by
putting a bit of slack in your schedule to accommodate these related tasks.

Assign Resources

The last step to finalizing your planned schedule is to decide on what resources you are going to need to
get those tasks done on time. You’re going to have to assemble a team, and their time will need to be
scheduled just like the tasks.

Meaning of Network Technique:

Network technique is a technique for planning, scheduling (programming) and controlling the progress
of projects. This is very useful for projects which are complex in nature or where activities are subject to
considerable degree of uncertainty in performance time.

This technique provides an effective management, determines the project duration more accurately,
identifies the activities which are critical at different stages of project completion to enable to pay more
attention on these activities, analyse the scheduling at regular interval for taking corrective action well in
advance, facilitates in optimistic resources utilisation, helps management for taking timely and better
decisions for effective monitoring and control during execution of the project.

Advantages of Network Technique:

Main advantages of the network system are as follows:

1. Detailed and thoughtful planning provides better analysis and logical thinking.

2. Identifies the critical activities and focus them to provide greater managerial attention.

3. Network technique enables to forecast project duration more accurately.

4. It is a powerful tool for optimisation of resources by using the concept of slack.

5. It provides a scientific basis for monitoring, review and control, to evaluate effect of slippages.

6. It helps in taking decision;

(i) To over-come delays,

(ii) To crashing programme,

(iii) Optimising resources, and

(iv) On other corrective actions.

7. It helps in getting better co-ordination amongst related fields.

8. It is an effective management tool through a common and simple language, providing common
understanding.

Limitations of Network Techniques:

Network techniques have following limitations:

(i) Network technique is simply a tool to help the management; hence its effectiveness depends on how
well it is used by the management.

(ii) Its accuracy depends on the estimation of the data used in the network.

(iii) It is useful only if it is updated regularly and decisions for corrective actions are taken timely.

cost budgeting

The idea of managing a project can seem like a daunting task, however, provided with the right tools,
any project can achieve success. When undertaking any type of project management, there must be a
working set of guidelines and objectives that must be followed, in order to guarantee success for that
particular project. An essential element when entering into any type of project management is cost
budgeting. To create an effective cost budgeting plan, a total budget for the entire project must first be
established. To achieve this, each area of the project must be analyzed and given a particular cost
estimate. Once that is done, the total sum of cost assessments, whether those costs are in individual
projects or in work packages, are combined to establish a certain parameter to provide a working
guideline for the budget. These guidelines are set in place so that the allotted costs are divvied up
amongst the appropriate project needs. This will ensure that the budget goals are being accurately
met. The process of cost budgeting is a simple, yet necessary process of any successful type of project
management.