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Financial Analysis
The portion of a reserve study (depreciation report) where the following consulting services are performed:
This represents one of the two parts of the reserve study – the other being the physical analysis.

The financial analysis contains two key parts, as follows:

A.  Expenditure Plan  (Quantification Formulas)
The alternative formulas to determine the capital load can be classified into two broad classes: a) top-down formulas and b) bottom-up formulas. They ask the question: "How much money will we need?". These models form part of the expenditure plan in the financial analysis.

Reinvestment formulas can be grouped into three general categories, as follows:      Group 1:
      Group 2:

B.  Funding Plan (Allocation Models)
Listed below are two groups of
funding models that are used once the expenditures (capital load) has been quantified. In other words, they ask the question: "How much money will we have?". They are a method of seeking equilibrium.

       Group 1:
      Group 2:
       Group 3:

Financial Assumptions
The financial analysis is underpinned by assumptions on the following:


Source Documents
The following documents are key to the development of the financial analysis:

Financial Reports/Deliverable
Listed below are some of the key output reports from the financial analysis:

A flowchart of the elements of the financial analysis
Fig. A flowchart of the elements of the financial analysis shown in red.

Fig. YouTube Video explaining the interaction of the elements in the financial analysis.



30-Year expenditure forecast as an example of the output from the financial analysis.
Fig.  30-Year expenditure forecast as an example of the output from the financial analysis.



If the physical analysis is realistic and the financial analysis is defensible, then all stakeholder interests are served.
Fig. If the physical analysis is realistic and the financial analysis is defensible, then all stakeholder interests are served.



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Fig. The three key financial documents used to generate the financial analysis: a) operating budget, b) balance sheet and c) insurance certificate.

See also:
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