Financial Management and Decision Making Assessment 1 Educational Artefact
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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.
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Assessment 1 Educational Artefact
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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 0-10000-12000-200000.893-8929-10714-17857 150005000100000.797398639867972 250005000100000.712355935597118 32000500040000.636127131782542 410001000020000.56756756741135 550000.507025330 Total cash inflow3000180006000 Total discounted cash inflow93831893018767 Initial investment100001500020000100001500020000 NPV (Total discounted cash inflows - initial -6173930-1233
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 AdvantagesDisadvantages Incorporation time value of moneyAccuracyinthismethoddependsonthe quality of inputs This is the simple way of determination of the projectdeliverablesofvalueforthe organization. This methods has been seen to be omitting costs for such an opportunity. Consideration of the company’s cost for the capitaloftheinvestmentanalysationis 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% 0-8928.60.870-8695.65
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13986.00.7563780.72 23558.90.6583287.58 31271.00.5721143.51 4567.40.497497.18 50.00.432 6 Total cash inflow9383.33 Internal rate of return (IRR)24.42%0.08% QUESTION 2 a) Over trading is basicallythe 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, excessiveborrowings, 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 ishaving 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 performanceby 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). Thisis advised to the company to focus on changing its payments as one of the crucial reason for occurring over tradingis 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. Thiscomprisesevaluatingthe liquidity,efficiency,liquidity,etc aspectsso 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 thatconducting 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 proceedits operational practices by having no interference. As comparedto this option, firm may face the higher cost of capital and interference which can hamper its decisionmaking 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 thethings which allows to have greater emphasis on gainingreliablebackbonethatcanprovideassistanceinplanning,encouraginghigher
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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 formaking higher relevant decision in respect to control expenses, eliminating irrelevant factors hampering its overall growth of firm.On the basis of this it can bespecified 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. InInternational 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 behaviorandfinancialliteracyamongyouth.Asia-PacificJournalofBusiness Administration.12(2). pp.163-181. Online BudgetasanInstrumentofControl.2022.[Online].Availablethrough: <https://www.icmrindia.org/courseware/management%20control%20systems/ MCS04.htm> Avoid the problems of overtrading. 2022.[Online]. Available through: <2022.[Online]. Available through:>