A confusion
is often observed between economic analysis
and financial analysis. Although the definitions
may vary and some concepts attached to each of the two topics be not so
easy to tackle, a rough distinction can be established:
The
financial analysis consists in comparing revenue and expenses
(investment, maintenance and operation costs) recorded by the concerned
economic agents in each project alternative (if relevant) and in working
out the corresponding financial return ratios ;
The economic
analysis aims at identifying and comparing economic and social
benefits accruing to the economy as a whole, setting aside for example
monetary transfers between economic agents.
This may
give rise to some confusion may arise: although tolls do not directly
take part in the economic computation of total benefits (except in the
case of generated traffic, but this would require further explanation)
they are nevertheless a key factor of the economic analysis because
the level of tolls will affect the transport demand and thus the economic
ratios of the project, and in particular the economic rate of return
(depending on the gap between the economic optimum and the actual pattern).
There is in
fact a double trade-off when trying to set up a toll rate:
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the
economic optimum does not necessarily correspond to the financially
preferable solution (see development of this point in
Influence of tolling on transport demand; - it must be
remembered that without congestion, the economic optimum toll rate
is zero! |
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the
toll level balancing economic and financial constraints may not
correspond to the willingness-to-pay
of the road users. |
Finally, it
must be remembered that economic and financial analyses are not self-contained
topics: they are used to verify the economic and financial sustainability
of the projects likely to be implemented.
Going back
to the examples quoted above, the financial sustainability of a given
project may not be compatible with the economic sustainability, and
the value of key parameters like tolls must be adjusted in order to
cope with both economic and financial constraints (see
also willingness to pay).
