Techniques and methods for evaluating investments are used for assessing whether and how fast the invested funds return. Investing is always in some way about investing funds (directly or indirectly) and the aim is either a financial income, interest or some ither positive effect, which leads to the increased competitiveness, market position or to the future returns (investment into educated people leads to the future success).
Evaluation is simpler for direct financial investment which leads into clearly measured outcome - the profit. In practice however we have kind of investment where a direct financial result may not be clear at first sight or in the short term. For example investments into educating people, into quality or security improvement is difficult to assess.
For the financial evaluation there is a large number of investment evaluation techniques. They can be distinguished into two groups - statistical methods and dynamic methods.
Static evaluation methods
They focus especially on monitoring of cash benefits or measuring of the initial expenditures. They don’t include a risk factor and take the time into account only in a limited extent:
Dynamic evaluation methods
They take into account the time and risk factor, the basis is discounting of input parameters.