Financial Management and Decision Making Assessment 1 Educational Artefact

This educational artefact covers topics such as computation of NPV, advantages and disadvantages of NPV, over trading, sources of finance, budgeting, and benefits of corporate governance and CSR.

Assessment 1 Educational
Artefact

TABLE OF CONTENTS
MAIN BODY..................................................................................................................................3
QUESTION 1..................................................................................................................................3
A..................................................................................................................................................3
B...................................................................................................................................................4
C...................................................................................................................................................4
D..................................................................................................................................................4
QUESTION 2..................................................................................................................................5
a)..................................................................................................................................................5
b)..................................................................................................................................................5
c)..................................................................................................................................................6
QUESTION 3..................................................................................................................................6
QUESTION 4..................................................................................................................................7
QUESTION 5..................................................................................................................................8
REFERENCES..............................................................................................................................10

MAIN BODY
QUESTION 1
A
Computation of NPV
Year
Projec
t (A)
Project
(B)
Project
(C)
PV
factor
@ 12%
Discounte
d cash
inflows A
Discounte
d cash
inflows B
Discounte
d cash
inflows C
0 -10000 -12000 -20000 0.893 -8929 -10714 -17857
1 5000 5000 10000 0.797 3986 3986 7972
2 5000 5000 10000 0.712 3559 3559 7118
3 2000 5000 4000 0.636 1271 3178 2542
4 1000 10000 2000 0.567 567 5674 1135
5 5000 0.507 0 2533 0
Total cash
inflow 3000 18000 6000
Total
discounted
cash inflow 9383 18930 18767
Initial
investment 10000 15000 20000 10000 15000 20000
NPV
(Total
discounted
cash
inflows -
initial
-617 3930 -1233

investment
)
Net present value is the calculated at the current total value of the future stream of the
payments. This has been considered to be the payments that is made for the investment which is
positive and it means that this is going to influence the discounted present value of all the future
cash flows that are related to the project (Akimova and et.al., 2020). For this business the most
return is from the Project B as it has the higher all the other investments in the projects. This
result shows that this is the most viable project to be invested in by the organization as it is going
to provide the most return on a given period.
B
As far as the financial aspect it can be evaluated that Project B is going to be the best
return aspect that is essential for the organization as it gets the highest return in the terms of
NPV. From the analysation it be seen that the total return from the project B is also higher to that
in comparison of how much it has been investment.
C
Advantages Disadvantages
Incorporation time value of money Accuracy in this method depends on the
quality of inputs
This is the simple way of determination of the
project deliverables of value for the
organization.
This methods has been seen to be omitting
costs for such an opportunity.
Consideration of the company’s cost for the
capital of the investment analysation is
considered.
It is a purely quantitative nature and does not
consider any qualitative factors (Raucci and
Tarquinio, 2020).
D
Computation of IRR
Year
Project
Alpha(A) 15% Project Beta(A)15%
0 -8928.6 0.870 -8695.65

1 3986.0 0.756 3780.72
2 3558.9 0.658 3287.58
3 1271.0 0.572 1143.51
4 567.4 0.497 497.18
5 0.0 0.432
6
Total cash inflow 9383.33
Internal rate of return (IRR) 24.42% 0.08%
QUESTION 2
a)
Over trading is basically the excessive of buying or selling of the financial instruments so that
significant accomplishing of organizational objective in effective manner can become possible. It
is as well-known as churning so that having to many open positions on single trading. From the
evaluation, it can be specified that over trading occurs in the business when a business expands
its operational practices too quickly that tend to result in having the failure in organization. In
addition to this it can be mentioned that thee are distinct form of benefits which are basically
accomplished by firm through having the over trading which actually results in possessing higher
productivity which can allow to have greater financial position by inclining its profitability. The
signs that can be taken into the consideration by organization which allow to find that over
trading is happening is lack of cash flows, small profit margin, excessive borrowings, loss of
supplier support, etc that tend to impact negatively.
b)
In order to become successful it is important for Camberwell Trading to pay attention on having
effective application of such activities that can help in attaining higher ability to overcome the
prevailing lacking areas.
 The one of the strategy that can be taken into the consideration by the specified
organization is having relevant application of activity such as leasing assets. The main
reason behind the application of this strategy is to have higher position to get free cash
flows so that significant performance by accomplishing all the practices that are
important for successful processing (Micah and 2018).

 It is articulated to pay attention on identifying those actions that are irrelevant to the
overall process of the company so that significant action for gaining competitiveness by
reducing cost. It can allow the particular company to get significant capability of
inclining its profit margin in turn attaining higher financial position can be done (Avoid
the problems of overtrading, 2022).
 This is advised to the company to focus on changing its payments as one of the crucial
reason for occurring over trading is late invoice payments for customers or clients that
has negative impact on the functioning of organization. The specified strategy can allow
the firm to get significant level of accuracy in its payment terms that can boost its
financial position.
c)
Ratio analysis is one of the crucial strategy that is helpful for the business as it can permit the
firm to evaluate its financial position by evaluating the different aspects that contributes towards
success. This comprises evaluating the liquidity, efficiency, liquidity, etc aspects so that
company is engaged in over trading or not. Some indicator of over trading includes having
higher revenue growth, low gross & operating profits, utilization of bank over draft facility,
increase in payable days, inclined current, decreased inventory turnover, etc. on the basis of these
indicators the company can recognize that it is facing the issue of over trading.
QUESTION 3
There are different kinds of sources of finances which can be taken into the procedure
by organization so that attaining goal of higher profitability in business. In the UK there are
various aspects which can be taken into the consideration by firm for gaining competitiveness in
terms of good strong financial position. This options are as follows:
Bank loan and overdraft is one of the significant option that can be used by particular firm for
which it needs to meet the eligible criteria so that better option for growth & development can be
received. This does not have the higher level of interference which permits company to function
effectively in industry.
 Savings and friends is another option that can be taken into practice by firm which can
allow to have higher profitability & stability. For this option the firm does not need to
focus on having good relation so that accomplishing higher profitability can become
possible.

 Issue of shares is one of the reliable action that can be used by firm for having relevant
ability to raise funds via possessing greater range of capital can be obtained. It can benefit
the firm to have higher capital so that conducting operational practices on large scale
cam be done.
 Venture capital is highly utilized as it provides assistance in approaching of capitalist to
invest in gaining strengthening the business possessing good amount of cash flow which
can permit in achieving higher profitability & ability to conduct the operational activities
(Patel and Hassan, 2023). This allows to have saved the taxes by having certain level of
performance can be done by specified organization.
 Other options which can be used by particular enterprise that includes having good
source of funds such as angel investors, retained earning and drawings, factoring, hire-
purchase, leasing, etc which can benefit the firm to accomplish its objective of having
profitability.
It is suggested to the firm to pay attention on having the application of source of fund
such as bank loan which can help in gaining the appropriate level of ability to proceed its
operational practices by having no interference. As compared to this option, firm may face the
higher cost of capital and interference which can hamper its decision making process that can
benefit firm.
QUESTION 4
Budgeting is one of the significant aspects that allows the company to get proper level of
ability to estimate its expenses and revenue so that higher ability to meet the objective of
making effective decision-making process (Budget as an Instrument of Control. 2022). It can be
helpful for the company to have proper budgeting as it permits conducting reliable forecasting of
expenditure that it need to incur for having effective conducting of operational practices. It is
related with setting such procedure which can allow to evaluate that firm is having the
availability of particular expense or not. It allows to take the decision regarding sources of funds
by having effectual evaluation of profitability in turn significant growth & development can
become possible. This allows to prioritize the things which allows to have greater emphasis on
gaining reliable backbone that can provide assistance in planning, encouraging higher

productivity, identifying problems and eliminating its causes, etc so that higher profitable
decision can be taken.
These all assist the firm to recognize corrective practice which can be utilized for making
higher relevant decision in respect to control expenses, eliminating irrelevant factors hampering
its overall growth of firm. On the basis of this it can be specified that firm can gain better
position make strategic decision by considering all the specified factors
The methods that is used for the computation of the breakeven analysis for the product and
services is the following formula.
Contribution Margin = Price of Product – Variable Costs.
In this method the fixed costs that are not affected by the number of items sold as the rent paid
for storefronts or production facilities. This is essential to be paid and includes fees paid for
marketing experiences as well but is also considered. The contribution margin is calculated by
the subtraction of the item’s variable costs of selling a product. The contribution margin is the
percentage that is calculated and expressed by the fixed costs from the contributor margin that is
able to determine the fixed costs. This contribution margin is able to determine the break even
for cutting production costs or raising the net profit or the sales beyond that of the contribution
for the net profit that is required. The determination of the breakeven analysis is able to allow the
determination of how the end of the calculation is able to current plan of the numbers for the
selling more products than the realized breakeven price. The launch of the product is needed for
the new variables that is essential for the fixed costs
QUESTION 5
Benefits of the company for the embracing the increasing the following are,
Corporate Governance
 This allows the business to be able to increase the corporate the corporate behaviour of
the organization which is considered to be the key factor that influences the clear
compliance culture (Sharif and Naghavi, 2020). Directly support the improved results
that is essential for the organization to be able to participate with the culture to be able to
ensure that are clear lines to communicate.
 This is also considered to be the factor that allows the business to be able to reduce the
costs that it incurs.

 Corporate governance is considered to be able to improve the top level of decision
making that is essential for the strong and demonstrable link that is present between the
organizational performance.
 This is also considered to be the factor that allows the business to be able to develop an
internal control that is essential for formulation of the success.
 This is also said to be the key feature that enables the strategic planning of the
organization and its management for the boards for the formulation of the goods.
Corporate Social Responsibility
 It has been considered that the better brand recognition in an organization is important for
being able to achieve the success that is required.
 Positive business reputation is developed with the help of CSR which is considered to be
the key factor that is essential for their development (Naveed and et.al., 2020).
 CSR allows the business to be able to increase the sales and the customer loyalty that is
essential aspect for the business to provide the success that is essential for their
operations.
 The operational costs for this organization has also increased as the business provides the
success that is essential for the achievement of the better financial performances.
 It is also considered to be the ability of the organization to be able to attract more people
and retain the staff that is important.
 CSR also allows the business to be able to increase their organizational growth that also
is a contribution to the success.
 CSR makes it easier for the organization to be able to develop the ability to attract new
talent and retian the staff.

REFERENCES
Books and Journals
Akimova, L. M., and et.al., 2020. Formation of the system of financial-information support of
environmentally-oriented management of the enterprise. Financial and credit activity
problems of theory and practice. 1(32). pp.434-443.
Micah, A.E. and 2018. Donor financing of human resources for health, 1990–2016: an
examination of trends, sources of funds, and recipients. Globalization and health, 14(1),
pp.1-9.
Naveed, M., and et.al., 2020. Role of financial and non-financial information in determining
individual investor investment decision: a signaling perspective. South Asian Journal of
Business Studies. 9(2). pp.261-278.
Patel, I. and Hassan, R., 2023. Exploring the Financial System of Madrasas in Gujarat with
Focus on Sources of Funds and Its Utilizations. In International Conference on Business
and Technology (pp. 55-71). Springer, Cham.
Raucci, D. and Tarquinio, L., 2020. Sustainability performance indicators and non-financial
information reporting. Evidence from the Italian case. Administrative Sciences. 10(1).
p.13.
Sharif, S. P. and Naghavi, N., 2020. Family financial socialization, financial information seeking
behavior and financial literacy among youth. Asia-Pacific Journal of Business
Administration. 12(2). pp.163-181.
Online
Budget as an Instrument of Control. 2022.[Online]. Available through:
<https://www.icmrindia.org/courseware/management%20control%20systems/
MCS04.htm>
Avoid the problems of overtrading. 2022.[Online]. Available through: <2022.[Online]. Available
through:>