Determining Short and Long Term Sources of Finance for Funding Acquisition

Individual Report

INTRODUCTION...........................................................................................................................3
1. Determining short and long term sources of the finance for funding the acquisition and in
meeting working capital requirements.........................................................................................3
2. Evaluation of several investment appraisal tools and recommending feasibility or viability
of acquisition...............................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The present report is based on Zylla Limted, operates large number of the ferries which
facilitate river crossing related services for the people, goods and the vehicles across river.
Furthermore, study presents the sources used for raising short and long term funds. Moreover it
also includes evaluation of the capital budgeting techniques in order to assess viability of the
project or acquisition.
1. Determining short and long term sources of the finance for funding the acquisition and in
meeting working capital requirements
Short term sources
Overdraft agreement- By entering into overdraft agreement with bank, it will allow the
company to borrow amount up to certain limit. In exchange of the borrowing, bank may ask for
the security in form of the collateral and they may charge interest on daily basis at variable rate
on outstanding debt (Cortina, Didier and Schmukler, 2018). On the other hand, if a business is
very much confident in making quick repayments then overdraft agreement is counted as
valuable financing source to which most of the companies resort for the purpose of funding
acquisitions.
Cash credit- It is been defined as arrangement made by bank for clients to withdraw the
cash exceeding their respective account limits. It is the facility which is generally sanctioned for
mainly one year, but it could be extended to 3 years. In case of the special request made by the
company or the client, time limit could further extended by bank. However, the extension of an
allotted time majorly depends on consent of bank and past or previous performance of client. The
interest rate charged by bank on the cash credit depends on time for which cash had been
withdrawn & amount of the cash.
Commercial papers- It is the short term instrument that the company could use for
funding the acquisition of Ferry and meeting its working capital needs. This financing instrument
helps in raising the money from market and act as an unsecured type of the promissory notes that
it offers to investors directly or indirectly through dealers (Khmel and Zhao, 2016). Commercial