Understanding Financial Processes

Understanding Financial Processes

The final domain process for the project manager to understand is the financial facet of the project. Many of the techniques are contained in the economic selection models earlier discussed. The understanding that the project manager needs is one of the interrelationships among the numerous ways that a financial estimation is done on a project or business unit. The most extensively used technique is shown in Figure (a).

DuPont Financial Model

Basically, any project selection or portfolio analysis criteria decision that influences product prices, per-unit costs, volume, or efficiency will impact profit margin or turnover ratio. And any decision that affects the amount and type of debt and equity used will impact the financial structure as well as cost. The domain of financial analysts and the office of the chief financial officer for many organizations use this analysis technique to decide on the funding of projects.

These financial concepts are important to understand because every business in the world is competing for capital. Money flows where the perceived risk adjusted return is greatest. If we as project managers and marketers of products and services to businesses understand these financial thoughts, we can better understand where we might be able to maximize help to our customers. Helping our customers as stakeholders in our projects leads to the success of our projects and products.


project manager, profit margin, turnover ratio
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