Fundamentals of static investment calculation

Static investment appraisal is an important method for evaluating investments in companies. In this article, we will take a closer look at static investment appraisal and explain its importance for companies.

What is static investment appraisal?

Static investment appraisal is a method for evaluating investments in which only the current cash flows are considered. This method is often used to analyze the profitability of investments and to make well-founded decisions about the allocation of resources.

Static profitability analysis

Static profitability analysis focuses on analyzing the current cash flows of an investment without taking into account the time value of money. It helps companies to assess the profitability of a project or investment based on current costs and revenues.

Advantages of static investment appraisal

Simplicity: Static investment appraisal is easy to understand and apply because it only looks at current cash flows.

Quick evaluation: By focusing on the current cash flows, a quick evaluation of the profitability of an investment can be carried out.

Decision support: Static capital budgeting provides companies with important information for making decisions about investments.

Conclusion

Static investment appraisal is an important method for evaluating investments in companies. By analyzing the current cash flows of a project or investment, companies can make informed decisions about the allocation of resources. Despite its simplicity, static capital budgeting provides valuable insights into the profitability of investments and helps companies maximize their financial success.