Financial Analysis of Volkswagen : Case Study

MFRD

TABLE OF CONTENTS
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................3
Internal and external sources of finance......................................................................................3
Implications of different financial sources..................................................................................4
Evaluation of suitable source of finance for the business project................................................4
Analysis of cost of different sources of finance..........................................................................5
Importance of financial planning.................................................................................................5
Information requirements of different decision makers..............................................................5
Impact of finance on different financial statements.....................................................................6
Task 2...............................................................................................................................................7
Analysis of budgets in order to make viable decisions for business...........................................7
Explanation of computation of unit cost and making pricing decision using relevant
information...................................................................................................................................8
Assessment of viability of project by making use of investment appraisal techniques...............8
Comparison of suitable format of financial statements for different types of business
organization...............................................................................................................................11
Financial statement of company................................................................................................12
Interpretation of financial statement by making use of ratio analysis ......................................12
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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INDEX OF TABLES
Table 1: Cash budget (in £'000).......................................................................................................8
Table 2: Calculation of Mark up on cost price (in £'000)................................................................9
Table 3: Calculation of Price by considering return on capital employed (in £'000)......................9
Table 4: Information of available projects.....................................................................................10
Table 5: NPV of project A ............................................................................................................10
Table 6: NPV of project B.............................................................................................................10
Table 7: ARR of option 1...............................................................................................................11
Table 8: Statement showing cumulative inflow of project A........................................................12
Table 9: Statement showing cumulative inflow of Project B........................................................12
Table 10: Computation of financial ratios of Volkswagen Plc......................................................13
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INTRODUCTION
Financial sources are crucial for business entity thus organizations are required to make
optimum utilization of available resources. For this aspect, they are required make suitable
business decisions by making use of appropriable financial tools. Present project report is
focused on evaluation of financial tools that can be used by management of business in order to
make effective financial decisions (Stendardi and O’Reilly, 2006). Present study will include
description of sources of finance along with its impact and financial cost. Further description will
be provided regarding financial techniques such as unit pricing, budgeting, investment appraisal
techniques and ratio analysis in order to make better decisions. For understanding of practical
approach Volkswagen has been considered.
TASK 1
Internal and external sources of finance
Management of Volkswagen is planning for expansion for the launch of new car in the
market. For this aspect, company can generate funds from following sources:
External sources of finance Equity issue: Company can issue part of their authorized capital to generate funds for
their business project. For this financial source company will be required to pay dividend
that is part of the profit to the shareholders (Nickels, McHugh and McHugh, 2011). In
addition to this, shareholders will also have right to participate in decision making of
business. Debt finance: Management of Volkswagen can also take loan from the banking and
financial institutions. For this financial source, they will be required to pay interest
charges in regular time interval (McKinney, 2015). Further, as per their contractual deed
they will be liable for the repayment of principal amount. Bank overdraft- For the fulfilment of capital requirements company can use service of
bank overdraft. In accordance with this financial source company can make payment to
the trade payable in excess to the available balance. For this service, bank will charge
interest rate from the customer.
Internal sources of finance
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