Conducting a Financial Analysis

In this rotation, you’re trying to choose among different investment projects. If you’re just thinking about the financial aspect of the choice, the question you’d like to answer is: which project will make the most money? That’s not as easy as it sounds.

Each project is going to cost money, and then, over some period of time, you hope to make all of that money back, and more. But how long will it take? What if one project makes a lot more money, but it takes ten extra years to see that money? Is that better or worse than a project that makes less money, but you get the money only a few years from now?

The data from a financial analysis answers these questions and gives you an objective way to compare different decisions. Specifically, conducting a financial analysis helps you see:

• How much money you’re going to have to spend or invest (costs)


• How much money you’ll get back (revenue)


• How long it will take for you to make enough money to cover what you spent (payoff point)


• How two different proposals or plans compare, even though they may have different costs, different profits, and different payoff points (using a tool called “net present value”)

How to Use this Guide
This guide walks you through the steps of conducting a Financial Analysis. In the Left Menu are navigation links, which will give you an overview of the entire process. You can work through the guide step by step or skip ahead to a specific step. If at any time during your review you need help understanding a topic, click on the Learn More links for more information.