Difference between revisions of "SPIS Toolbox - Basic decision-making tools"

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| style="width: 150px; background-color: rgb(222, 226, 192);" | <span style="color:#000000;"><span style="font-size: 90%">'''[[SPIS Toolbox - Credit Policy: Risk Analysis|►Go to the Next Chapter]]'''</span></span>
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An investment decision usually requires an assessment of whether the investment is feasible. This due diligence process will minimize the risk of losing any funds committed to the investment. In essence, this means: if I invest my capital, will I increase my capital, or at the very least avoid losing my capital? &nbsp;
 
An investment decision usually requires an assessment of whether the investment is feasible. This due diligence process will minimize the risk of losing any funds committed to the investment. In essence, this means: if I invest my capital, will I increase my capital, or at the very least avoid losing my capital? &nbsp;
  
A solar irrigation system (SPIS) is generally a long-term investment choice to reduce farm operating expenses or increase agricultural productivity. Ideally, it is both. This implies an understanding of the farm enterprise, as a business, in terms of all costs and incomes. The '''[[:File:INVEST Farm Analysis Tool V1.0.xlsx|INVEST – Farm Analysis Tool]]''', contained in this Toolbox on SPIS, allows for conducting an assessment on farm profitability. It provides entry sheets for adding various farm expenses and incomes and automatically calculates the farm profit margin. It also highlights which fixed and variable costs are most prominent and where savings could have a significant impact. The '''[[:File:INVEST Farm Analysis Tool V1.0.xlsx|INVEST – Farm Analysis Tool]]''' generates a Farm Income Statement, which can be presented to a lending institution.
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A solar powered irrigation system (SPIS) is generally a long-term investment choice to reduce farm operating expenses or increase agricultural productivity or both. This requires an understanding of the farm enterprise, as a business, in terms of all costs and incomes. The '''[[:File:INVEST Farm Analysis Tool version 3.0.xlsm|INVEST – Farm Analysis Tool]]''', contained in this Toolbox on SPIS, allows for conducting an assessment on farm profitability. It provides entry sheets for adding various farm expenses and incomes and automatically calculates the farm profit margin. It also highlights which fixed and variable costs are most prominent and where savings could have a significant impact. The tool generates a Farm Income Statement, which can be presented to a lending institution.
  
The '''[[:File:INVEST Farm Analysis Tool V1.0.xlsx|INVEST – Farm Analysis Tool]]''' is useful for:
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The tool is useful for:
  
 
*Determining the current level of profitability (pre-investment base line)
 
*Determining the current level of profitability (pre-investment base line)
*Determine the anticipated profitability of the investment (post-investment projection)
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*Determining the anticipated profitability of the investment (post-investment projection)
  
Once the profitability of the farming enterprise is confirmed however, this does not automatically imply that an investment into an SPIS is the most sensible choice. This is especially true if other pumping technologies are readily available on the market. A Diesel or Grid-connected pump might be more feasible where water pumping is only required for a limited time per year. The '''[[:File:INVEST_Payback_Tool_V1.0.xlsx|INVEST – Payback Tool]]''' considers and compares other pumping technologies. Basic data is collected from technology suppliers and the payback period against the farm profit and the different technologies is automatically calculated.
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Even when the profitability of the farming enterprise is confirmed, however, this does not automatically imply that an investment into an SPIS is the most sensible choice. This is especially true if other pumping technologies are readily available on the market. A Diesel or Grid-connected eletric pump might be more feasible where water pumping is only required for a limited time per year. The '''[[:File:INVEST Payback Tool version 3.0.xlsm|INVEST – Payback Tool]]''' considers and compares solar powered irrigation systems with other pumping technologies. Basic data is collected from technology suppliers and the payback period against the farm profit and the different technologies is automatically calculated.
  
 
==== '''<span style="color:#879637;">Outcome/Product</span>''' ====
 
==== '''<span style="color:#879637;">Outcome/Product</span>''' ====
  
 
*Assessing pre-investment and post-investment profitability;
 
*Assessing pre-investment and post-investment profitability;
*Determine most financially viable pumping technology option.
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*Determining most financially viable pumping technology option.
  
 
==== '''<span style="color:#879637;">Data Requirements</span>''' ====
 
==== '''<span style="color:#879637;">Data Requirements</span>''' ====
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*Financial service providers;
 
*Financial service providers;
*associations of producers / potential borrowers;
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*Associations of producers / potential borrowers;
*technology providers.
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*Technology providers.
  
 
==== '''<span style="color:#879637;">Important Issues</span>''' ====
 
==== '''<span style="color:#879637;">Important Issues</span>''' ====
  
 
*An annual re-evaluation of farm profitability allows for monitoring improvements, recognizing risks timely and identifying future investment opportunities.
 
*An annual re-evaluation of farm profitability allows for monitoring improvements, recognizing risks timely and identifying future investment opportunities.
 
 
{{SPIS Reference}}
 
{{SPIS Reference}}
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| {{Next Chapter}}[[SPIS Toolbox - Credit Policy: Analyze Potential|►Go to the Next Chapter]]'''</span></span>
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Latest revision as of 06:48, 9 December 2021

►Back to the Start Page ►Back to the Module Page ►Go to the Next Chapter

1. Basic Decision-Making Tools

An investment decision usually requires an assessment of whether the investment is feasible. This due diligence process will minimize the risk of losing any funds committed to the investment. In essence, this means: if I invest my capital, will I increase my capital, or at the very least avoid losing my capital?  

A solar powered irrigation system (SPIS) is generally a long-term investment choice to reduce farm operating expenses or increase agricultural productivity or both. This requires an understanding of the farm enterprise, as a business, in terms of all costs and incomes. The INVEST – Farm Analysis Tool, contained in this Toolbox on SPIS, allows for conducting an assessment on farm profitability. It provides entry sheets for adding various farm expenses and incomes and automatically calculates the farm profit margin. It also highlights which fixed and variable costs are most prominent and where savings could have a significant impact. The tool generates a Farm Income Statement, which can be presented to a lending institution.

The tool is useful for:

  • Determining the current level of profitability (pre-investment base line)
  • Determining the anticipated profitability of the investment (post-investment projection)

Even when the profitability of the farming enterprise is confirmed, however, this does not automatically imply that an investment into an SPIS is the most sensible choice. This is especially true if other pumping technologies are readily available on the market. A Diesel or Grid-connected eletric pump might be more feasible where water pumping is only required for a limited time per year. The INVEST – Payback Tool considers and compares solar powered irrigation systems with other pumping technologies. Basic data is collected from technology suppliers and the payback period against the farm profit and the different technologies is automatically calculated.

Outcome/Product

  • Assessing pre-investment and post-investment profitability;
  • Determining most financially viable pumping technology option.

Data Requirements

  • Current farm expenditure and income;
  • Projected farm income and expenditure;
  • Capital costs (capex) for different pumping technologies;
  • Operating expenses (opex) for different pumping technologies
  • Interest rates from lending institutions
  • Inflation and fuel increase rates

People/Stakeholders

  • Financial service providers;
  • Associations of producers / potential borrowers;
  • Technology providers.

Important Issues

  • An annual re-evaluation of farm profitability allows for monitoring improvements, recognizing risks timely and identifying future investment opportunities.
►Back to the Start Page ►Back to the Module Page ►Go to the Next Chapter