Short and Long Term Sources of Finance for Zylla Limited

This report discusses the short and long term sources of finance for Zylla Limited to fund their acquisition and expand their ferry business. It also evaluates different appraisal techniques and recommends the operation of a new ferry.

Task 4: Business
Scenario for Individual
Report

Table of Contents
INTRODUCTION...........................................................................................................................3
Short term and long term source of finance to funds the acquisition..........................................3
Evaluation of different appraisal techniques and recommended the operation of new ferry......5
REFERENCES................................................................................................................................6

INTRODUCTION
Financial management is the method which help in identifying as well as managing the
funds inflow and outflow of the company in the well define manner. This is essential for the
company to keep the records of the firm as it an useful resource for expanding business (Yan,
2019). The present report is based upon Zylla limited which provide ferry services to the end
user. Organisation want to expand the business as to maintain the demand and supply of the
market. This report covers the financial aspect of short and long term source of as to conduct
operational activities in a smooth manner. Beside this, it is important for the company to use
various kind of appraisals method which is used in the organisation to encourage and motivates
the employees.
Main body
Short term and long term source of finance to funds the acquisition
Finance help growth of the company and plays an vital role in growth and development
of business. After running the business cash is required to develop a sustainable business model
for the longer time period. The entity like Zylla must use short and long term source in order to
make smooth flow of the company. Along with this it facilitates in to meet the requirement in
fulfilling the needs and wants of the firm effectively. Short term loan is consider as beneficial as
it aid in increasing volume of production in the limited time period. Here are some of the short
term loan which is important for to expand business:
Merchant and cash advances: This is consider as short term loan which is consider as
a cash advance but still operates like a loan. For the organisation like Zylla this kind of loan can
be beneficial as the firm can avail loan in advance to expand ferry business and also aid in
repayment of the loan in the well define manner. It allow company to access the company a
credit facility which can be used any time to fulfil the capital requirement of the business entity.
In this case entity can repay the loan after the business get started.

Bank credit: The bank provide short term loan to the organisation in order to capture
large market share. In the context of Zylla can use such kinds of credit loans which are given at
lower interest rate to expand the business at the initial level. When the bank provides the loan to
firm the amount is credit directly to the borrowers account. There are different kinds of bank
credit such as overdraft and discounted bills. Apart from this, it helps firm to fulfil the
requirement of capital resources to purchase new ferry.
Invoice financing: This type of loan is done by using business accountable receivables.
The loaner provide the money to the organisation and charge interest on the basis of days
through which invoice remains outstanding. Zylla management should use such kinds of credit
facilities as it is easy to acquire the loan for a small exposure. It is consider as less risky
compared to the long term because of shorter maturity date.
Long term loan:
This is the type of finance which is used for hiring new equipment, research and the
development beside the cash flow (Cairns and Wright 2019). For the company like Zylla limited
this is essential for the company to use long term credit as they provide stable model to expand
the business for the longer time duration. There are some of the long term loan which are
explained down below:
Debt finance: It means the firm raises the money for the working capital expenditure by
selling bonds, bills to the different institutional investors. In the context of Zylla the receive
money for a condition to repay the principal and interest on the debt. At the early stage this can
be seen as the convertible notes. On the other hand firm can raise the capital in the debt market to
issue share of stock in the public offering.
Corporates bonds: A Corporates bond is consider as the credit loan which is issued to
collect the funds effectively and expand the business to serve larger audience. The finance
manager of Zylla must issue such kinds of bonds because these are consider as the safe and
secure sources of gathering resources. Along with this, corporates bonds are convertible in nature
and firm can buy new ferry to expand the business effectively.
Evaluation of different appraisal techniques and recommended the operation of new ferry
Appraisals methods are use to encourage the performance of the organisation and
improve the quality of project. Zylla is expanding the business in order to increase there

profitability and and market share effectively (He, 2019). These techniques consists of internal
rate of return and accounting system. Here are some of the appraisal techniques which are
explained below:
Payback period: This refers to the amount of time taken to recover the cost of the
investment. The manager of Zylla limited can use the payback period to make the quick
judgement of the investment. This concept of payback period is generally used as the financial
and capital budgeting. Along with this, it is consider as to determine the cost saving of energy
and efficiency of the technology.
Accounting rate of return method: These method are use to measure the revenue to
which is important for the company to expand the business. In the context of Zylla limited entity
have to focus to express the net accounting method in order to increase the capital investment.
The ARR divides the average revenue from asset by the company initial investment in order to
derive the ratio or the return which can be expected over the lifetime.
Practical aspect of Zylla Limited:
Payback Period = Cost of Project / Annual inflow
Cost of Project = Investment – Scrap Value
Net present value (NPV): It is the difference of current value of cash inflow or current
value of cash outflow. It help the organisation to measure their present value after the investment
(Laird and Venables, 2017).
NPV (Net Present Value) = Cash Inflow – Cash Outflow
Internal Rate of Return (IRR): It is a interest rate where all the cash flow of net present
value is equals to the zero. Basically is used for the evaluation which provide the information
weather project is beneficial or not to invest.
Calculation:
Evaluation of viability of ferry:
Initial investment = 150000
Year Cash flow
PV factor @
10 %
Discounted
cash flow
1 55230 0.909 50204.07

2 70045 0.826 57857.17
3 88375 0.751 66369.625
4 79870 0.689 55030.43
5 57555 0.621 35741.655
265202.95
NPV = 265203-150000
= 115203
From the above method this has been identified company should use accounting rate of
return method as this help firm to save time and money for firm. This is so because their project
present value is in positive.
CONCLUSION
As per the given report it has been clearly concluded that financial management is
important aspect for expansion of the business. Beside this firm should make use of short term
loans as this not require large amount of resources to expand the business. At the firm must use
payback period as it is consider as best method for the company.

REFERENCES
Books and journals
Cairns, G. and Wright, G., 2019. Making scenario interventions matter: Exploring issues of
power and rationality. Futures & Foresight Science, 1(1), p.e10.
He, S., 2019. Scenario analysis for container shipping investment strategies.
Naqash, F., Wani, S.A. and Hussain, M., 2019. An Overall Scenario of Pesticides Business
Pattern in Kashmir: A Special Reference to Apple Crop. Indian Journal of Economics
and Development, 15(3), pp.392-401.
Simona, F. and Cristian, P., 2019. Rainfall option impact on profits of the hospitality industry
through scenario correlation and copulas. Annals of Operations Research, pp.1-
24.Gormley, A. and Gormley, R., 2019. Test Scenario Design Models: What are.
Yan, Y., 2019, July. Consultancy project for the employer scenario of Google. In 2019
Scientific Conference on Management, Education and Psychology (Vol. 1, pp. 25-29).
The Academy of Engineering and Education.