The investment study is a written document that is very similar in content to the Business Plan, but of a somewhat larger scope. It is made for investments of higher total value (usually above 100,000.00 euros).
Investors, such as banks, investing their available funds to ensure the implementation of the investment project expect a certain return because they have given up spending these funds at present. Entrepreneurs who use this borrowed capital for the realization of an investment project start from the assumption that its realization will benefit themselves, but also the owners of borrowed funds or other sources of financing. Therefore, there is a need to calculate the economic justification of investing funds from the point of view of financial efficiency.
The financial efficiency of investment projects is determined by considering the net cash flows of the investment, taking into account the time preference of money, using different methods of financial decision-making. Methods for measuring the financial efficiency of investment projects, try through mathematical expressions and legality to relate the financial effects of a potential investment project with the amount invested.
The investment study often has about a hundred pages, on which, in addition to the textual part, there are also a series of tables, figures and graphical representations which are used to explain individual items from the study in more detail and pictures. It is a professional study that must be well prepared. All elements of the Investment Study must be related and the slightest change in any financial parameter affects other parameters and changes the complete structure and the obtained results of the analyzes performed in the Investment Study.
Since this is a study that will convince investors and banks to invest their money in the project, it is recommended to entrust the preparation of this study to an expert. When doing an Investment Study, the idea is not to prove at all costs that a project is profitable if it is not realistically. On the contrary, the Investment Study must realistically assume future business events that occur after the investment has been made. Only when the investor is convinced of the viability of his business idea, he can move towards banks and other external sources of financing with the aim of closing the financial structure of the project.