Simply speaking, project appraisal means the assessment of a project. Project appraisal is made for both proposed and executed projects. Actually, Project appraisal is a costs and benefits analysis of a proposed project with an objective to adjudge is feasibility.
Project appraisal is a cost and benefits analysis of different aspects of proposed projects with an objective to adjust its viability. It involves calculating the feasibility of the project before committing resources to it. Thus, it helps to select the best project. For appraising a project, its economic, financial, technical, market, managerial and social aspects are analyzed.
There are many reasons for which project appraisal is done. It is a tool which is also used by companies to review the projects completed by it. These are the following:
- Selecting the best project;
- To assess projects credit-worthiness,
- To assess the profitability of the project;
- To assess the probable cost and benefit;
- To assess the requirements of raw material;
- To assess the fixed and working capital;
- To anticipate a possible market of the product;
- To assess the management’s competence,
- To find out whether the various factors of production are available,
- Fulfilment of social objectives such as employment generation, development of backward areas, etc.
So, these are the various reasons for which project appraisal is done.