Exploring the Financials

Our financial decisions are totally based on money, time and worth. While making a financial valuation, we must consider the value of the project at the starting of the project which is the present value (PV), and the future value (FV), which is what you have at the ending of a project. It is imperative to calculate the Total Cost of Ownership (TCO) of a project which is a total estimate of all the costs including the purchase price in addition to all other costs to be incurred during the project time. Net present value (NPV) of the project which is the PV of the future cash flows minus the purchase price or the initial cost incurred for the Project. It is important that every firm should calculate the TCO and NPV to determine whether the firm is going to generate a negative or positive cash flow. There are instances where the managers handling the finances of a firm manipulate the costs to portray a positive cash flow to the management.

This is also true in case of stocks where some firms resort to falsely raising the stock price to the advantage of the owners, and quickly selling off the stocks to a huge profit once the price has risen, resulting in a sharp fall of the stock price. Calculating the TCO and NPV and making use of the results in a right manner should warn the firm of any future risks and taking measures to overcome them. The individuals working on the financials of a firm should also be aware of the significance of the work they are doing without blindly carrying out the analysis. As this is very important for every firm, being up to date and doing the analysis in a timely and right manner can save a firm from any sort of risk and also be largely profitable to the firm if used in a proper and efficient manner.