THE ROLE OF ACOUNTANT IN PROJECT FEASIBILITY AND VIABILITY APPRAISAL ( A CASE STUDY OF CASAVA STARCH PRODUCITON)
The entrepreneur must have a range outlook on the intended business investments, business investments, examine the alternative uses of capital and account for financial requirement and carry sensitivity and risk analysis.
This study promises an analysis and illustration of the principles of feasibility and viability appraisals and highlights the essence of the subject matter. It also brings into focus the accountants essential contributions, which have hitherto tended to be cost in wide diffusion. In view of the objective of the study, the literature review examines the views of various writers on the subject matter. Its emphasis is on meaning, importance and components of feasibility and viability studies historical perspective and the role of the accountant thereof.
Research design and methodology details the method used in carrying out the research for the project. It specifies the sources of data, target population, sampling method and also describes the research instruments and method of administration and analysis of data.Data presentationa dn analysis presnts a afeasbility case study of hosuehold cassava – starch milling plant. It details the findings of the researcher regarding the project and examiones.Specifically the marketing, technical economic and social factors involved. Financial analysis and evaluation provides an illustration of the role of the accountant in a practical project appraisal situation. It details the application of the data presented above in making relevant financial projections for 5 years.Also a matching of the projected cost against the projected revenue is done. In conclusion, this study centered on the role of an accountant in a project evaluation which has been demonstrated in this study by the viability appraisal of operating a starch milling plant
TABLE OF CONTENTS
1.1 Background to the study
1.2 Statement of the problem
1.3 The objective of the study
1.4 Scope of the study
1.5 Research questions
1.6 Significance of the study
1.7 Definition of the terms used in the study
2.0 Literature review
2.1 Meaning and significance of feasibility and viability appraisal
2.2 Historical perspective
2.3 Basic distinction between feasibility and viability appraisal
2.4 The importance of feasibility and viability appraisal
2.5 Compared of feasibility and viability study
2.6 Roles of accountant in the formation and development of new enterprises
2.7 Feasibility and viability studies and accountant.
3.0 Research methodology
3.1 Research design
3.2 Population and sample size
3.3 Research instrument used
3.4 Design of interview guides
3.5 Method of data analysis
4.0 Data presentation
4.1 Data presentation and analysis of result
5.0 Summary of findings, recommendations and conclusion
Almost daily, Nigeria Newspapers Larry prominent reports of new manufacturing ventures soon to be launched by individual or by local groups. Perhaps, tomorrow a state government will be telling us how college industries will stem the flow of youths from rural to urban areas. From the headlines alone Nigerians cannot escape the feeling that the rest of the 1990s holds great promise for unprecedented economic and social progress. But these expectations will be fulfilled only if most of the specific projects survive their early lives. Besides, not all those new projects will be completed. Some that get completed will not prove profitable and may soon close down. According to Nwoko (1988:34) summits that in simple terms one reason for which new projects may not be completed but have to be abandoned or profitable ventures may get choked up by controllable environmental factors and circumstance is that proper feasibility analysis was not conducted abinitio, before take –off of project.
According to Ume 91977:10).. stated that proposals schemes or projects for social, environmental and economic development demand feasibility and viability appraisal. In fact the two fundamental questions which feasibility and viability appraisal seek to answer are inevitable for prudent decision – making at all levels in the society.
The entrepreneur must have a long range outlook on the intended business investment, examine the alternative uses of capital and account for inflation in future value of cash flows, and forecast future events and financial requirements and carry sensitivity and risk analysis.
These are highly technical areas of knowledge that calls for expertise skills. Therefore this category of valuation (no doubt) holds out limitless opportunities and boundless scope for service and rewards for the accountants economists, valuers or appraisers.
This study provides an analysis and illustration of the principles of feasibility and viability appraisals and highlights the essence of the subject matter. If also brings into sharp focus the accountants essential contributions which have hitherto tended to be lost in wide diffusion
1.1 BACKGROUND OF THE STUDY
The study is divided into two sections. Section one which comprises chapter 1,2 and 3 deals with the main basis, scope and methodology of he research.
Specifically, chapter two provides an evaluation of the theoretical concept of investment appraisal. Hence, the contributions of various writers with regard to the concepts of feasibility and viability studies as well as the role of the accountant there off are examined under the heading “literature review”.
The second section comprises chapter 4 and 5, and focuses on feasibility and viability case study on a practical illustration of feasibility and viability case study of a household cassava-starch production.
1.2 STATEMENT OF THE PROBLEM
One of the problems of a successful industrialization in he developing countries is undoubtedly lack of formulation of a project in such a way that its potential profitability either from the public or private view point can be estimated on a firm basis. According to Ezeanagu (1991:14). This assertion is evidently proved by the survival rate of the national directorate of employment supported small scale enterprises in Nigeria which has been put at a mere 15%. According to Uwakaneme (1980:1) this problem can be pinned on the tendency in Nigeria entrepreneurs to neglect thinking through their plans carefully in the beginning in form of feasibility and viability study before committing scarce funds and energy apart from insufficient starting capital and shortage of skilled technical and managerial manpower.
Many good business ventures are abandoned after plunging in huge amounts of money because their originator just embarked upon them in that they feel there is market demand and they could get enough funds to execute the project. According to Ughamadu 91990:18) regrettably, as Uwakaneme (1980:3) puts it, many Nigerian businessmen see feasibility studies not as a vital part of their project but as an imposition and an absolute necessity for fulfilling loan requirements or for attracting equity participation. Thus, the more embellished the report the better.
Available evidence indicates that even trusted accountants, consultants prepare project reports and projections to suit their clients requirements and earn their fees: insensitive of the credibility to Olashore 91985:5), consequently, the proposals get rejected by the bankers, or share the facilities granted, the business proprietors soon find themselves in trouble when they are faced with real life situations as distinct from the rosy picture painted by the initial projections by the accountants.
1.3 OBJECTIVES OF THE STUDY
The objectives of the study stem from the problems identified above and are as follows:
1. To determine the main techniques of appraisal commonly adopted for analytical purposes and to determine the reasonableness of such in practical situations.
2. To appraise the potential of feasibility and viability studies in successfully carrying out a project ideas.
3. To identify the general role of the accountant in the formation and development of business.
4. To identify the specific role of the accountant in feasibility and viability appraisals.
5. To illustrate the principles and applications of feasibility and viability studies suing a small scale cassava starch plant as a case study
1.4 THE RESEARCH QUESITONS
Following from the problems identified in the problem statement as stated above, the following fundamental questions have income imperative for this study:
1. What are the underlying principles and significance of feasibility and viability appraisals?
2. What impact do feasibility and viability appraisals have on the survival o failure of new projects?
3. What is the role of a professional accountant in the preparation of credible feasibility and viability appraisals in order to help avert project failure
4. How would an accountant evaluate the viability of the small-scale cassava starch project in order to properly advise a potential investor on such project?
1.5 SIGNIFICANCE OF THE STUDY
The target audience of this study are students of accountancy in the tertiary educational institutions and all those interested in the field of project evaluation.
Since there appears to be no existing literature on the role of the accountant in feasibility and viability studies, this project attempts to till that gap for the benefit of accounting students. It would also help young entrepreneurs and indeed the management of small-scale business to appreciate the necessity of feasibility and viability appraisal which will translate to the survival of their business which will in turn enhance the attainment of the government objective of rapid industrialization.
1.6 DEFINITION OF TERMS
The following are the contextual definition of some terms used in the study:
A project is the use of one or more scarce resources during specific time period for the purpose of producing some economic returns or out put at a latter time. A project is the consumption in the near future of scarce or at least limited resources in the hope of obtaining in return over a longer is an optimum set in the investment oriented by means of which a defined continuation of human and material resources is expected to cause a determined amount of economic and social development. According Nweze (1987:”34)
According to SIR D.C Osuagwu (2003:31) investments are carried out primarily for maximizing an entities wealth and can be varied into:
Mechanization of process where a firm wants to change its manual system of production to installation of a machine or expansion is a process.
Investment is an economic activity designed to increases, improve or maintain the productive qualify of the existing stock of capital. According to Nweze (1987:34).
NB: project evaluation, investment analysis or appraisals are for the purpose of this study, synonymous and therefore used interchangeably here.
FEASIBILITY AND VIABILITY
Feasibility and viability have been explained in detail elsewhere in this study. But for the present purpose let it suffice that respectively the mean “practicability and profitability:.
The term appraisal is synonymous with valuation, according to Umeh (1977:5) it is an estimate or an opinion fixing the price for something. An appraisal may be made off hand and delivered orally or presented in an authoritative and comprehensively written form to the client who requires the appraisal to make a decision or to execute a policy. In this work, the terms appraisal, evaluation and analysis have been used interchangeably.
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