Ask a CFO with James Vanreusel – Finance’s Role in Evaluating New Business
In this episode of Ask a CFO, James Vanreusel discusses more corporate finance questions. This week the subject is the role of a finance department in evaluating new business opportunities.
The main goal here is to ensure your company does not run out of money when taking on a new project. There are four key questions that you have to ask yourself before in order to determine if you have enough cash- even if the project will be profitable quickly.
- What is the gross margin of the project expect to be?
- How much overhead will need to be added?
- How long will it take to get paid?
- What is the size of the project and the amount of time until completion?
The answer to these questions tells you how much $ must be available at inception to be able to take on a new project.