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Financial Management | Meaning & Objectives

Analyzing the financing options for German Company XYZ's fast-paced growth in 2016.

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Added on  2020-01-07

Financial Management | Meaning & Objectives

Analyzing the financing options for German Company XYZ's fast-paced growth in 2016.

   Added on 2020-01-07

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FINANCE MANAGEMENT1
Financial Management | Meaning & Objectives_1
Table of ContentsINTRODUCTION ...............................................................................................................................5TASK 1 ................................................................................................................................................51. Uses and Sources of Funds for 2013-2015 period.......................................................................52. Calculation of Working Capital...................................................................................................5TASK 2 ................................................................................................................................................71. Application of Investment Appraisal Techniques........................................................................72. Recommendation for acceptance of Project................................................................................8Conclusion............................................................................................................................................9REFERENCES...................................................................................................................................10Index of TablesTable 1: Calculation of Working Capital..............................................................................................6Table 2: Pro forma Balance Sheet for 2016..........................................................................................6Table 3: Pro Forma Profit and Loss Statement.....................................................................................7Table 4: Calculation of NPV and IRR (Amount in€ millions).............................................................7Table 5: Calculation of Discounting factor...........................................................................................8Table 6: Details of risk free rate, premium and beta............................................................................9Table 7: Calculations for weights and cost of debt and equity.............................................................92
Financial Management | Meaning & Objectives_2
INTRODUCTION Finance is at heart of every business. Financial management is core activity of business tomaintain its financial health and improved performance every year. Capital structure of business iscalculated in this report using various ratios and forming Pro forma balance sheet and Profit andloss account for a German company XYZ. Moreover this reports specifies the investment appraisaltechniques and detailed insight into calculation of overall cost of capital.TASK 1 1. Uses and Sources of Funds for 2013-2015 periodThere are various sources of finance available for companies and their utilisation differswith nature of business, repartition and many more factors such as duration for which funds arerequired, cots of funds etc.(Biddle, 2015).2013201420152016Source of FundsLongtermdebt+Equity sharecapital+ bank loanLongtermdebt+Equity sharecapital+ bank loanLongtermdebt+Equity sharecapital+ bank loanLongtermdebt+Equity sharecapital+ bank loanUses of FundsFunds are utilisedtopurchaseinventory andfixed assets toderivefutureeconomic benefits.Thereissignificantinvestment infixed assets in2014 as comparedto 2013 which isfundedfromraising equity andlong term debtaggressively.Increase in fixedassets and currentassets in 2015 isfundedfromraising long termdebt and partiallyfrom equity sharecapital.In year 2016 newprojects are to beraised from bankloans and avoidingthe long term debtwithhigherinterest rates.2. Calculation of Working CapitalWorking capital is a measure to check the company's short term Financial health and itsefficiency to repay the current obligations(Baños-Caballero, García-Teruel and Martínez-Solano,2014). Working capital is calculated by deducting current liabilities from the current assets.Working capital is expected to decrease in 2016 due to decrease in cash. Account payables andInventory are increased for 20% in respect to sales.3
Financial Management | Meaning & Objectives_3

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