What is Economic Evaluation?
Economic Evaluation assesses the viability of a business or project before financing. It assesses whether it generates more cash out than the cash it requires to operate (including any start-up and ongoing capital). Is it healthy in its own right? Can it “stand on its own legs”?
The evaluation models later can have the Financing added. A separate worksheet would take key information from the four cash streams and add debt and equity. (This is a one-way flow of data as data should not flow back to the four cash streams.)
Likewise, the economic evaluation model can have an accounting worksheet added that takes key data from the four cash streams and from the financing worksheets to generate the usual accounting results.
Eyes Wide Open
The key philosophy of this website on economic evaluation is that all available information is assessed and sorted to create an easy-to-understand economic model. This model uses rigorous modelling practices (that themselves are easy-to-learn) and so becomes transparent and intuitive and high in confidence. It gives a helicopter view. Key people can make the final decision with “their eyes wide open”.