Business Report based on S PLC Case Study

Business Report

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK A...........................................................................................................................................3
1. Importance of Capital investment appraisal process...............................................................3
2. Preparing Cash flow analysis statement..................................................................................4
3. Calculating Payback period for S PLC...................................................................................4
4. Calculating Net present value.................................................................................................4
5. Describing the logic behind the net present value approach and relationship between net
present value and cost of capital.................................................................................................5
6. Calculating internal rate of return...........................................................................................5
7. Discussing why the net present value method is often regarded to be superior to Internal
rate of return................................................................................................................................6
TASK B ..........................................................................................................................................7
Critically contrasting cheapest source of long term finance bank loan and an equity issue for
all long-term finance requirements of S PLC. ...........................................................................7
TASK C...........................................................................................................................................8
1. Calculating the break even sales revenue................................................................................8
2. Consequences of a price increase or decrease of 10%............................................................8
3. Cost volume profit analysis.....................................................................................................9
TASK D...........................................................................................................................................9
1. Distinguish between strategic suppliers, preferred and transactional suppliers......................9
2. Comparing the advantages of single sourcing and multiple sourcing in the context of
procurement...............................................................................................................................10
3. Explaining cross sourcing and its benefits............................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business report is an official statement that provides overall information about company's
position and financial data. The report provides brief details about company's operations and
helps in taking decisions related to business. The case study will analyse a financial strategy
including financial, accounting and budgeting management of S PLC. Further, it evaluates
procurement and sourcing within the organization. Along with that, the report will calculate the
rate of return and break even sales revenue on the basis of given data. Additionally, it will
provide detailed explanation of long term finance requirement such as equity and bank loans and
cash flow statement. At last, the study will discuss single, cross and multiple sourcing and
various types of suppliers.
TASK A
1. Importance of Capital investment appraisal process
 Investment appraisal helps the S PLC in various ways such as it gives information to
traders about stock or a company's long term potential based on the capabilities and
profitability.
 It gives information about company resources and potential efforts used by S PLC in
order to achieve objectives. It is helpful in investment decision and strategic business
decisions to achieve desired long term goals.
 In the company, understanding the risk totally depends upon cash flow analysis statement
(Warren and Seal, 2018). Thus, a capital investment appraisal includes the projected cash
flow and annual profit margins. From this the company can evaluate the performance and
profitability of long term achievement.
 In order to review available investment, the company needs to compare between
alternative and proposed projects (Pawlak, Rapacewicz and Zarzecki, 2020). The
company needs to determine the available capital resources and then make investment
decision.
 Capital investment appraisal process is important for S PLC because it is helpful to move
the project from initial investment to its inauguration in order to achieve goals.

2. Preparing Cash flow analysis statement.
Particulars / Year
1
(in £)
2
(in £)
3
(in £)
4
(in £)
5
(in £)
Sales revenue 600 1000 1200 1000 800
Less: Cost of sales 180 300 360 300 240
Incremental cost 100 100 100 100 100
Depreciation 200 200 200 200 200
Total expenses 480 600 660 600 540
EAT 120 400 540 400 260
Add: Depreciation 200 200 200 200 200
Net cash inflow 320 600 740 600 460
3. Calculating Payback period for S PLC
The amount of time period takes to recover that cost of an investment is called payback
period. The short payback period is more beneficial for company in order to achieve business
goals. The payback period calculations can be done by anyone and helpful in taking decision
about investments.
Year Cash inflows (in £)
Cumulative cash
inflows (in £)
1 320 320
2 600 920
3 740 1660
4 600 2260
5 460 2720
Payback period
2 + (1300- 920) / 740 =
2.5 years
From this the company can find out the net cash flows by dividing the initial investment.
From the above mentioned calculation it is evaluated that the payback period is 2.5 years which
is good for the company's performance. Yes, the project can be accepted by S PLC if the
company imposes a three-year maximum payback period.