Sources of Finance and Investment Appraisal Techniques

Report on behalf of the Director
of Finance

TABLE OF CONTENTS
INTRODUCTION.....................................................................................................................3
MAIN BODY.............................................................................................................................3
Different sources of finance...............................................................................................3
Evaluation of various investment appraisal techniques................................................4
CONCLUSION.........................................................................................................................6
REFERENCES...........................................................................................................................7

INTRODUCTION
The process of making decision is an integral part of every business
organization which requires to carry out complete analysis. This report presents
about the organization Zylla Ltd. which provides ferries for the purpose of river
crossing services to the people and vehicles and goods. The company is looking for
an expansion plan for which various sources of financing is being analysed. It also
covers whether the company should continue with the expansion plan or not.
MAIN BODY
Different sources of finance
Short Term Financing
The short term sources of finance is essential for managing the working
capital requirements of the business (Abor, 2017). It covers wages, salaries,
purchasing material, marketing and advertising and other overhead cost. The various
sources of short term finance that are available to the company are stated below.
Trade credit: It refers to the amount of credit provided by the supplier of the
raw material or products in the normal business operation. It is most widely used
method but requires to have a credit worthiness of the company along with the
confidence of the suppliers for doing trade credit. There are certain limitation of this
method but the major factor is that sometimes suppliers may charge higher prices or
cause loss of cash discount.
Customer advances: Under this, the company can ask its customers to
make certain amount of payment in advance before providing any goods and
services. This can used by the businesses and is affair deal as well.
Factoring services: This service is provided by banks or other financial
institutions. Under this, the finance is provided by discounting the bill of exchange
received from the customers. The organization gets the payment from the bank by
paying certain amount of discounting charges and afterwards bank collects the
money on the due date from the customers.
Long-Term Financing
The long term funds refers to those funds which are required for a longer
duration at least more than 1 year (Leon, 2019). This is mainly for the long term