Business Investment Leverage Sbp Theme | Bureau Federal Investigator

Many new business owners and perhaps some in business for awhile may take pride in their ability to make decisions "by the seat of their pants". Sometimes good intuition is all one needs, however other times a good decision is not necessarily intuitively obvious, even to an experienced small business owner. This is where a solid approach to financial analysis decision making can be used. Fortunately, most business people can readily use some of the Microsoft Excel functions to help in this process.

Present Value Discounted Cash Flow (DCF) Investment Analysis

The approach is best employed when trying to decide whether or not to invest in one venture versus another. Perhaps the decision is to proceed in purchasing a new machine or going forward with a new marketing campaign versus another. Although, the act of doing nothing is also a choice. The use of present value analysis implicitly assumes that money available now is worth more than money or returns expected in the future.

The underlying theme, of course, is that investing in one approach will increase profits to the business owner in some assumed future or over a specified period of time. As stated above, the longer the investment horizon is stretched into the future, the less value are the returns as compared with the value of funds today. The data that is needed to use the Excel function are the following: