The Role Of Accountant In The Project Evaluation In The Oil Sector

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PROJECT TOPIC AND MATERIAL ON THE ROLE OF ACCOUNTANT IN THE PROJECT EVALUATION IN THE OIL SECTOR

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  • Name: The Role Of Accountant In The Project Evaluation In The Oil Sector
  • Type: PDF and MS Word (DOC)
  • Size: [70 KB]
  • Length: [56] Pages

 

 

CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY:

Project evaluation is of dual approachies vis-à-vis project and evaluation. Project has to do with investment decision which most of these decision have direct effect in future profitability of the organization either because they will result in an increase in revenue generation or they will bring about an increase in efficiency and cost effectiveness.

In the other hand, evaluation has to do with the analysis of the investment to see whether it will be worth while to take decision on it to go ahead with project’s expenditure.

According to Aguolu, P.S.O (1997:6), investment decision are the use of funds on long term asset. What is needs in investment should be known before financing decision are to be taken. “A peculiar aspect of these is that they involve future benefits which are in many cases difficult to predict”. The investment decision of a firm are commonly known as “capital budgeting or capital expenditure decision”.

Aguolu, P.S.O, (1997:70) “states that capital budgeting decision is that financial decision which involves and outlays of funds in the present time with the expectation of future returns over a period of time”. He further sees project evaluation as one of the capital budgeting processes.

On this note, the accountant plays the role of evaluating the suitability and adaptation of the project in relation to profit maximization.

Also in evaluation, the project is expected to be measured on incremental basis what determines. The acceptance of a project is it’s changes (positive in the firms revenue, cost and tax strems). In constrast, cash flow that would be changed by the investment should be degraded.

1.2     STATEMENT OF PROBLEM

As a technical and creative aspect of human endeavour, project evaluation requires knowledge, experience and all the skills needed by a manager to perform job effectively. The accountant’s competence in project evaluation during his choice of a project for the organization is very significant.

In a free market economy, it is generally delivered that the investors pays for an investments or intrinsic value. The problem here is how can the accountant relate the future cash flow, the expected returns and the degrees of risks associated with the investment to the market economy.

Another problem the accountant may be faced with is the calculation formula, he will effectively use the evaluation formula so as to rationalize between theory and practice. These constraints will help us to investigate into the failure of project or why project brings in lower value of expected cash flow stream, even after being selected through the modern method of project evaluation.

PURPOSE OF THE STUDY

Although  the industry under study is a heavy and capital intensive sector and hence require a large sum of money to invest in any commitment of fund and such activities requires a thoroughful analysis to ascertain the validity of such project and the profitability of cash flow streasm. This work is aimed at

–        Knowing the role of an accountant in project evaluation and selection.

–        Ascertaining the extent that project evaluation has helped a corporation in maximizing the benefits projects wvaluation and selection.

–        To ascertain the usefulness of project evaluation in determining the future cash flow stream of project.

1.4     SIGNIFICANCE OF THE STUDY

The importance of every research work is to contribute to the existing knowledge. Therefore, this study will be important to entrepreneurs and managers of corporations in that it will guide them in decision taking / making on investments. Some of the importance also includes

–        It will benefit financial analysis as a source of data collection

–        It will equally benefit students as a research materials and other seekers of knowledge.

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