Short and Long Term Sources of Finance for Zylla Limited

This report discusses the short and long term sources of finance for Zylla Limited and evaluates different appraisal techniques for 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......4
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Financial management is the method which focuses on the ratios, equity and debts. This
also refers to the technique of managing funds and resources in such a manner as to accomplish
the objective of the company in effectively manner(Karpenko and et., al., 2019). The report is
based upon Zylla Limited which operates Ferry which is used to cross the rivers. It covers short
and long term sources of finance which help in carry out the operational activities smoothly.
Further it involves different appraisal techniques which encourage employees to achieve the goal
in a well define manner.
Short term and long term source of finance to funds the Acquisition
The various source of funding aid firm to expand the business effectively and also assist
in creating feasible model for growth and expansion. After the formation of the organisation it
require funds which help in expansion and growth efficiently. The main purpose of the short
term loan is to smooth flow business and also to meet the financial requirements effectively.
Further this, enables the entity to maintain the stock of raw material and the finish goods. The
firm must use short term finance which becomes more essential which increase the volume of the
production for the shorter time span. There are some short term loans which is beneficial for the
company to expand the business.
Trade creditors: It is the kind of loan which is given to manufacture or the supplier of
the raw material to the company. Mainly these credits are given between 30 to 90 days. In the
context of Zylla this is important for the firm to take loan on the behalf of trade as this will help
in expansion of business effectively. This is essential for the business to increase the value of the
firm and the productivity.
Bank loan: This is the organisation which avail the loan to the company to carry forward
the daily activity. For the organisation like Zylla manager can drive these services to improve the
current position by using short term loan. When the bank provide the loan to borrower the
amount is credited on the basis of requirement. It provide different services such as loan credit,
cash credit and overdraft with the low interest rate.
Instalment credit: This is the loan which is provided on the fix amount of money and
the borrower agrees to make set of number of payments which should be paid as the individual
takes the loan. In the context of Zylla this is consider as the one of the easy way to take loan

which is essential for as this does not require huge amount of money. Further the major
advantage of instalment credit is that company can avail loan on the basis of instalment.
Long term loan:
This is the method which is generally use when the organisation require new machinery
or want to expand the business. So Zylla limited should use such kind of credit facilities for the
smooth functioning(Hayashi and et.,al., 2019). Here are some of the factor which are explained
down below:
Equity financing: This is the method of financing which is used to offer stock or share
for the company. It is consider as the common method for raising the fund from the market. For
the company like Zylla equity financing often result in dissolution of share ownership and also
enable to improve the profitability. Hence this can help in expansion of business and company
can buy ferry for providing better services to consumer.
Corporate bond: These are the bonds which is issued by organisation to collect the fund
which assist in expand the business in the well define manner. For the company like Zylla should
issue the corporate bond as this reduced the risk and uncertainty of funds for the company. These
kind of bond is convertible and company can purchase new equipments to expand the business.
Evaluation of different appraisal techniques and recommended the operation of new ferry
The investment appraisal method is use to manage new project in the well define manner.
For the organisation like Zylla this is essential for the firm to make sure that these techniques
should be avail by employees as this expand and improve the business effectively(Ferrell and et.,
al., 2019). Here are some appraisals techniques which are stated below:
Payback period: This is the method which is most common and used by various
companies. Zylla limited must use such kind of method which is used to cover the initial cost for
the organisation. In the context of Zylla this is essential for the organisation to set a payback
period for buying new ferry as the amount generated will be paid back as the agreement done by
the bank.
Accounting rate of return method: It is the method which is used to identify the profit
from the investment done by the company. For the company like Zylla firm can emphasis on net
accounting method as it keep all the track of inflow and outflow of the cash in efficiently
manner.
Practical aspect for Zylla Limited:

Payback Period (PP): It is mention to the time period which required to retrieve the initial cost
of investment. Lower payback period will be chosen because it is beneficial for the company.
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:
Year Cash flow PV @ 3% DCF
0 -150000 1 -150000
1 55230 0.971 53628.33
2 70045 0.943 66052.435
3 88375 0.915 80863.125
4 79870 0.888 70924.56
5 57555 0.863 49669.965
5 45000 0.836 37620
NPV 208758.415
IRR 34.14%
Payback Period 1.49
*Working Notes: -
Cost of Project = Investment – Scrap Value
= 150000 – 45000
= 105000

Annual Inflow = 55230 + 70045 + 88375 + 79870 + 57555 / 5
= 351075 / 5
= 70215
Payback Period = Cost of Project / Annual inflow
= 105000 / 70215
= 1.49 years.

CONCLUSION
It has been concluded that, proper financial management is important as this help in
increasing the productivity and also help in expansion and growth in the for betterment. Along
with this it is important for the company to use short term loan as it is consider as easy way to
expand the business for longer time period.

REFERENCES
Books and Journals
Eccles, N.S. and Magagula, B., 2019. Consider the following scenario:“A politically connected
White Western European businessman offers to smooth the way for your company to
sell in his country… for a fee.”. African Journal of Business Ethics, 13(1).
Ferrell and et., al., 2019. Business ethics, corporate social responsibility, and brand attitudes: An
exploratory study. Journal of Business Research, 95, pp.491-501.
Hayashi and et.,al., 2019. Circular Economy in Business Strategy of Manufacturing Company.
In Technologies and Eco-innovation towards Sustainability I (pp. 171-182). Springer,
Singapore.
Karpenko and et., al., 2019. Formation of the system of fair business practice of the company
under conditions of corporate responsibility. Academy of Strategic Management
Journal, 18(2), pp.1-8.
Manolache, A.E.D., 2019, May. Stress and scenario tests in the context of a Romanian non-life
insurance company. In Proceedings of the International Conference on Business
Excellence (Vol. 13, No. 1, pp. 149-161). Sciendo.
Quiceno and et., al., 2019. Scenario analysis for strategy design: A case study of the Colombian
electricity industry. Energy Strategy Reviews, 23, pp.57-68.