Zylla Company Report: Short and Long Term Financing, Investment Appraisal Techniques

This report paper provides a basis upon which Zylla company's board will be advised on the viability associated with the acquisition of the new Ferry. It discusses short and long term sources of finances to fund the acquisition of the Ferry and for the Company's working capital needs. It also evaluates various investment appraisal techniques and recommends the viability of the acquisition and operation of the new Ferry based on one suitable investment appraisal technique using the data above.

Running head: ZYLLA COMPANY REPORT 1
Zylla Company Report
Neagoe Mariana Ramona
Affiliation
Date

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Zylla Company Report
Introduction
Zylla Limited is a company that deals with the operation of different ferries, which
provide different river crossing services to people, goods, and vehicles across the river. The
Zylla Limited Company is currently in good business, and therefore it is seeking to expand its
services to other areas. The Company's management has, therefore, decided to purchase a new
ferry for the Company to deal with the Company's increased demand. Zylla Limited Company is
currently seeking for funds both for the purchase of their new Ferry and for the payment of the
Company's working capital requirements as far as its expansion is concerned. This report paper,
therefore, provides a basis upon which Zylla company's board will be advised on the viability
associated with the acquisition of the new Ferry.
Main section
1. Short term and Long term sources of finances to fund the acquisition of the Ferry
and for the Company's working capital needs
Short term sources of finances
There are short-term sources of finances that the Zylla Limited Company can use in
acquiring the Ferry for the working capital needs of the Company. Among these includes the
Company's daily profits on its services. The Zylla Company is already in operation, and
purchasing a ferry is just a mere form of expansion for the Company. The Company currently
makes profits from providing different river crossing services for vehicles, people, and goods

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across the river. The profits that the Company makes from these services can be saved by the
Company so that they can contribute to the purchasing of the Ferry (Kumaran, 2015)
In addition to the above, the Zylla Limited Company can further enter into an overdrafts
agreement with any bank in the area to obtain such resources. Through such an agreement, the
bank can allow Zylla Company to borrow money to a given limit `without creating any need for
any further discussion (Steven, 2018). As far as this agreement is concerned, the bank is viable
for asking the Zylla Limited Company to provide collateral security and may, therefore, charge
the Company daily interests on its outstanding debt. However, in case the Zylla Company is very
confident that it will pay back to the bank in the shortest time possible, this overdraft agreement
is a very valuable source of finance for this Company's new project, (Ashok, 2015)
Long-term sources
There are long-term sources that the Company can use to obtain the funds that it requires for
its acquisition of the new Ferry. Among these includes obtaining the long-term loan from a given
local bank. The Zylla Limited Company can seek a loan from one of the banks in its area to
purchase the new Ferry. A long term loan as far as the Zylla Limited Company is concerned is
important since it will help the Company not only meet its need to purchase the new Ferry but
will also cater for its other long term financing needs,( Jeswani, 2018). In addition to the above,
the Company can also retain its profits as its source of finances for the purchase of the new
Ferry. Instead of making different dividend payments to different shareholders, or putting
investments in its other new ventures, the Zylla Limited Company needs to retain a given
percentage or portion of its profits from the services that it provides and use it as a source of
funds for purchasing the Ferry. Such a source of fund is better than obtaining a bank loan since it

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allows a bank to become self-sufficient as far as its financing needs are concerned ( Karmakar,
2018).
2. An evaluation of various investment appraisal techniques and recommending the
viability of the acquisition and operation of the new Ferry based on one suitable
investment appraisal technique using the data above
The main appraisal techniques of investment that I would use as far as the acquisition and
operation of this new Ferry is concerned are the Payback period method and the accounting rate
of return method. As far as the payback period technique is concerned, the payback period is in
most cases expressed in terms of the years of operation. As far as this technique is concerned, the
Zylla Limited Company has to consider the cash inflows from the new Ferry's capital investment
to be equal to the Company's cash outflows. This technique can help in the recognition f the new
ferry project's original capital, which was invested. During the payback time, the cash inflows as
far as the new project is concerned will equate to the cash outflows of the ferry project, (Aisha,
2018).
Another technique that the Zylla Limited Company can use is the accounting rate of return
technique. This technique can also be termed as the return on investment technique. This
technique can be employed in measuring increments in the overall profits that an organization
expects to obtain from any investment through expressing its net accounting profit obtained from
such an investment as a capital investment capital. However, the Zylla Limited Company needs
to put into consideration the fact that this technique will not take into consideration all the
different years for which the Ferry will operate (Hunjra et-al, 2012)
Recommendation

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According to the data provided above, I would recommend the Zylla Limited Company
to use the Payback Period appraisal technique. Such an assertion is based on the fact that this
technique will help the Company understands the recovery time through the provision of data
concerning the cash inflow accumulation every year until the obtained inflow equates to the
overall original investment. This recommendation is based on the fact that today's world is
constantly changing and therefore, the Zylla Limited Company cannot be certain of what is
likely to happen tomorrow. Such a technique can, therefore, act as a risk indicator as far as the
aspect of purchasing the new Ferry is concerned. More so, the Zylla Limited Company is a small
company, which operates on a small scale according to the data provided. The Zylla Company,
therefore, lacks skills that are needed for highly sophisticated techniques hence making this
technique the most appropriate one since it is simple and easy to understand. According to the
data provided on the anticipated cash flow for the Zylla Company Limited, it is very clear that
there is likely to be a reduction in the Ferry's cash inflows due to the depreciation of the Ferry
after some time. The Payback Appraisal technique is, therefore, the best method in this case
since it will provide year-to-year data on the cash inflows of the Company (Khan, 2013).
Conclusion
Zylla Limited Company deals in the operation of ferries, which provide people, goods,
and vehicles to cross rivers. The Company is correctly working well, and therefore, it is seeking
expansion. Zylla's possible main short-term source of finances includes its daily profits, entering
an overdraft agreement with the bank and others. The main long-term sources include obtaining
a long-term loan, retaining its profits and others. The most appropriate appraisal technique for
Zylla Limited Company's intention to purchase a new technique is Payback period method or
technique.

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References
Aisha, P., (2018). Top 7 Investment Appraisal Techniques | Capital Budgeting. Retrieved
from;http://www.accountingnotes.net/financial-management/capital-budgeting/top-7-
investment-appraisal-techniques-capital-budgeting/10968
Ashok M. (2015).10 Main Sources of Short-Term Fund. Retrieved
from;http://www.accountingnotes.net/financial-management/finance-sources/10-main-
sources-of-short-term-fund/8090
Hunjra I.A, Batool I, Shabbir G, Niazi K.S. (2012). Investment Appraisal Techniques and
Constraints on Capital Investment. Retrieved
from;https://www.researchgate.net/publication/316430355_Investment_Appraisal_Techn
iques_and_Constraints_on_Capital_Investment
Jeswani H. (2018). 7 Major Sources of Long -Term Finance. Retrieved
from;http://www.accountingnotes.net/financial-management/public-sector/7-major-
sources-of-long-term-finance/7431
Karmakar, R., (2018). 5 Long-Term Sources of Fund for a Company Accounting. Retrieved
from;http://www.yourarticlelibrary.com/accounting/long-term-capital/5-long-term-
sources-of-fund-for-a-company-accounting/65349
Khan, F., (2013). Investment Appraisal.pdf. Retrieved from;
https://www.academia.edu/32530312/Investment_Appraisal.pdf

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Kumaran, S., (2015). Sources of Short-Term and Long-Term Financing for Working Capital.
Retrieved from;https://www.invensis.net/blog/finance-and-accounting/sources-of-short-
term-and-long-term-financing-for-working-capital/
Steven B., (2018). Short term sources of funds. Retrieved
from;https://www.accountingtools.com/articles/what-are-short-term-sources-of-
funds.html