Financial Management: Equity Finance, Investment Appraisal Techniques

Financial Management

Table of Contents
INTRODUCTION...........................................................................................................................3
Question 2 Long term finance: Equity finance................................................................................3
(a) Determining the number of shares to be issued, the theoretical ex-rights price, the expected
earnings per share and the form of the issue for each rights issue price.....................................3
(b) Scrip dividends and its benefit for the company and the shareholders..................................6
Question 3 Investment appraisal techniques....................................................................................7
1. Analysing the feasibility of acquiring the machinery by calculating the feasibility using
different investment appraisal techniques...................................................................................7
2. Critical evaluation of benefits and limitations of different investment appraisal tools...........9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Financial management refers to controlling, managing, directing, evaluating the business
operational activities of the business organisation. It obtains the required fund and utilized in the
business to effective operation of the business function (Castrogiovanni and et. al 2016). It also
applies the basic accounting concepts, general principle in the financial activities of the entity.
Financial management is generally concerned with regular and adequate supply of fund in the
enterprises. It may cover the financial aspects such as capital requirement, source of fund,
investment fund, management of cash and financial control over the enterprises. In the subject of
financial management some of the basic concepts includes that is defined in this report.
For the better understanding of the financial function in the business, report includes earning
per share and right issue concept for brand plc and investment appraisal techniques of a food
manufacturing company lovewell Ltd. This report of the financial management is beneficial for
the management of the particular companies in the decision making process regarding company's
earning or net profit and how much amount cost to the company for issue price. And business
can make decision regarding the investment proposal that will be benefited for the organisation
lovewell Ltd. So they can make decision which option is best for organisation as well as increase
the profitability in present situation.
Question 2 Long term finance: Equity finance
(a) Determining the number of shares to be issued, the theoretical ex-rights price, the expected
earnings per share and the form of the issue for each rights issue price
Brand Plc is a business organisation that wishes to raise £160,000 from a right issue. The
aim behind this right issue is to expand existing operations. It is important to first understand the
concept of right issue. Right issue is basically share that are provided by the company to existing
shareholder to the company. It is also called as right offer. In the basic terms, it is defined as
when an enterprises require some additional capital in the business than it goes to present
shareholder for the purpose to issue the share at discount price for these existing shareholders. It
is invitation to stakeholders to purchase the share in the company at certain discount on market
price (Cummins and Derrig, 2012). These are some benefit of the right issue that are discussed as
below:
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