What does "investment appraisal" assess?

Investment appraisal primarily focuses on evaluating the viability of an investment project. This process involves analyzing various factors such as potential returns, associated risks, and the overall impact of the investment on the organization’s financial position. By conducting an investment appraisal, decision-makers can determine whether an investment aligns with the company’s strategic goals and whether it is expected to generate a sufficient return to justify the financial commitment.

This assessment often employs various techniques, such as net present value (NPV), internal rate of return (IRR), and payback period analysis. These methods help quantify the expected benefits of the investment against its costs, ensuring that resources are allocated effectively to projects that will enhance the organization's value and growth potential. In contrast, the other options focus on different aspects of financial management that do not pertain specifically to evaluating individual investment opportunities.