Business Finance Report: Investment Proposals, Funding Methods, Variance Analysis, Procurement Comparison

Business Finance
Business Report

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART A...........................................................................................................................................3
Analyse the investment proposals...............................................................................................3
c) Rank the projects on the basis of Pay back as well as Net present value.............................10
d) Select the project when all the offers are mutually exclusive...............................................10
e) Explain the strength and weaknesses of payback period and net present value method.....10
f) Discuss about the qualitative factors which will help the directors in making a final
payment.....................................................................................................................................11
PART B..........................................................................................................................................11
a) Suggest 3 alternative methods of funding...........................................................................11
b) Create a link between the financing and investment decision in relation to acquisition of
unlisted company......................................................................................................................12
PART C..........................................................................................................................................12
a) Prepare a full variance analysis statement of variable cost elements....................................12
b) Suggest the possible explanations for variances identified..................................................14
PART D.........................................................................................................................................14
Compare the centralised and decentralised procurement along with discussing about their
benefits......................................................................................................................................14
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Business report can be defined as a set of knowledge related to the operations of the firm.
This report is prepared with a motive of making future plans for the firm. It comprises of
comparative analysis of various project and budgets along with their examination with actual
results (Anifowose and et. al., 2018). The firm chosen in this report is K plc. It is listed firm. The
report is divided into four parts. Its first section analysis the various projects offers along with
the recommendation on the project to be chosen. Second part suggests the firm about the various
sources of funds available to it and best one to adopt for the purpose of acquisition. The third one
evaluates the performance of firm on the basis of its budgeted values with the actual ones. The
forth section presents the contrast among the decentralised and centralised purchasing along with
their advantages.
PART A
Analyse the investment proposals.
a) Calculation of Pay Back Period.
Project A
Year £000
Annual cash inflow Cumulative cash flow
0 -1000000
1 300000 -700000
2 300000 -400000
3 300000 -100000
4 300000 200000
5 300000 500000
6 300000 800000
Pay back period of Project A = 3 + 100000 / 300000
= 3 + 0.33
= 3.33 years

Project B
Year £000
Annual cash inflow Cumulative cash flow
0 -400000
1 100000 -300000
2 100000 -200000
3 100000 -100000
4 100000 0
Pay back period of Project B = 4 years
Project C
Year £000
Annual cash inflow Cumulative cash flow
0 -700000
1 200000 -500000
2 200000 -300000
3 200000 -100000
4 200000 100000
5 200000 300000
Pay back period of Project C = 3 + 100000 / 200000
= 3 + 0.5
= 3.5 years
Project D
Year £000
Annual cash inflow Cumulative cash flow