Shorter and Lengthy Term of Source of Funds for Acquiring New Ferry and Working Capital

This report discusses the different sources of funds for acquiring a new ferry and satisfying working capital requirements. It also provides an overview of various risk assessment techniques and evaluates the feasibility of purchasing and running a new ferry using one acceptable investment assessment technique.

Business Scenario for Individual
Report

Table of Contents
MAIN BODY.............................................................................................................................2
1. Shorter and lengthy term of source of funds in order to acquire new ferry and for
satisfying requirement of working capital. ..........................................................................2
2. An overview of different risk assessment techniques and indicating the feasibility of
purchasing and running new ferry using one acceptable investment assessment technique.
...............................................................................................................................................4
CONCLUSION..........................................................................................................................5
REFERENCES...........................................................................................................................6
This is crucial in the trade associations sense to ensure that adequate
financial resources are available. This is because financing is an essential part
of all sorts of functions. To satisfy the need for financial aspects companies
raise funds from multiple sources (Roberts, 2015). The project report is based
on a corporation engaged in delivering river crossing facilities by ferry. This
business wants to increase its own industry in the current time span by
gaining new ferries. In contrast, the report also contains integration of
portfolio evaluation methods with an aim of taking correct decision of
investment.
MAIN BODY
1. Shorter and lengthy term of source of funds in order to acquire new ferry
and for satisfying requirement of working capital.
In the existing business situation, there is a vitally important variety of
financing channels by which corporations receive funds. This relies on
businesses that from which source of financing they get funds.
Eventually, there are two types of sources of funds which are mentioned
below in such manner:
Short term source of finance - It can be interpreted as a type of financial
source by which businesses can receive funds for less than a year in order to
meet a shorter expenses requirement (de Meijer and de Bruijn, 2014). Such as
in the Zylla Limited company, they can fulfil requirement of working capital by
help of this source. It consists various sources like:
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 Bank loan or overdraft – The term bank loan can be defined as an
amount of cash transferred by a bank at cost to a borrower,
generally on leverage, over a certain period of time. While the bank
overdraft is a form of service in which individuals can withdraw
funds even, they do not have enough amount in bank account. It is
a main source of quick term for fulfilling working capital
requirements.
 Additional partners- In this source of finance, a company may add
additional partner and they contribute a sum of money in overall
funds. It can be useful for satisfying short term needs. In the Zylla
limited company, they can fulfil their working capital needs by
adding some new partners.
 Accounts receivable financing- This is source of short term finance
in which companies can sell their receivables to third party in order
to fulfil need of urgent cash. Above company can get fund by this
method to fulfil working capital need.
Long term source of finance- It can be interpreted as a type of financial source
by which businesses can receive funds for more than a year in order to meet a
longer expenses requirement. Such as in the Zylla limited company, they can
fulfil requirement buying new ferry by help of this source. It consists various
sources like:
 Leasing – This can be defined as an agreement between lessor (owner
of assets) and lessee (a person who received assets) for hiring of
particular assets for limited time frame on payment of agreed rentals. In
the aspect of above company, this can be finding out that they can
acquire new ferry on leasing which will save their funds.
 Retained earning- It is a type of source of finance that can be generated
inside of firm without any cost (McFarland, 2015). This can be gained by
companies if they do not pay dividends to their shareholders from
profits. Such as in the above company, they can fulfil need of acquiring
new ferry by this source of fund.
 Term loan from financail institutions- This is an important source of
finance in which companies can get financial assistance from external
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financial institutions such as bank. Like in the above company, they can
acquire new ferry by taking loan from banks.
2. An overview of different risk assessment techniques and indicating the
feasibility of purchasing and running new ferry using one acceptable
investment assessment technique.
There are different types of methods that are implemented to make real study
of different investment plans. Below, some technique that are as follows are
mentioned:
 Payback period- It can be characterized as a method used to
measure the length of time that may have taken place in the phase
of covering investment costs. This is calculated by below
mentioned formula-
If cash flows are equal:
Payback period = Initial investment / cash flow
When there is unequal cash flow-Payback period = Years before recover + UN-
recovered cost in beginning of year + Cash flow in the year.
 Accounting rate of return- This is characterized as methods used
by firms to calculate the projected rate on which revenue can be
produced on investments. Formula to calculate rate of return:
ARR= (Average annual profit after depreciation / Investment) x 100
 Net present value method- This can be described as a methodology
used to calculate the current value of any given project. Formula to
calculate NPV:
NPV = Discounted cash flow – Initial investment
 Internal rate of return- This is a kind of technique in which the inner
rate of return is calculated to evaluate project utilization. Formula
to calculate IRR:
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Analysis of efficiency of ferry:
Initial investment = 150000
YEAR Discount Factor Cash Flow Computation
1 0.971 55230 53628.33
2 0.943 70045 66052.43
3 0.915 88375 80863.12
4 0.888 79870 70924.56
5 0.863 57555 49669.96
Decommissioned 0.863 45000 38835
TOTAL 359973,4
NPV 359973.4-
150000=209973.4
NPV=PRESENT VALUE OF CASH INFLOWS-PRESENT VALUE OF CACH
OUTFLOWS
Analysis- Based on the above calculated net present value, it can be found
that acquiring a new ferry can be useful for the above firm. This is so because
the present value of their project is in optimistic.
CONCLUSION
In the end of project report, it can be concluded that financing is a key
aspect for companies and for this purpose companies get funds from
different sources. The report concludes about both quick and lengthy term
source of finance as well as about various investment appraisal technique
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such as internal rate of return, net present value and many more. In the
end, this can be articulated that above company should acquire new ferry.
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REFERENCES
Books and journal:
Roberts, R., 2015. Finance for small and entrepreneurial business. Routledge.
de Meijer, C. and de Bruijn, M., 2014. Cross-border supply-chain finance: An
important offering in transaction banking. Journal of Payments Strategy
& Systems. 7(4). pp.304-318.
McFarland, B.J., 2015. International finance for REDD+ within the context of
conservation financing instruments. Journal of sustainable
forestry 34(6-7). pp.534-546.
Ford, I.D. and Leonidou, L. C., 2013. Research developments in international
marketing. New Perspectives on International Market-ing, edited by SJ
Paliwoda. pp.3-32.
Kennedy, S.F., 2018. Indonesia’s energy transition and its contradictions:
emerging geographies of energy and finance. Energy research & social
science. 41. pp.230-237.
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