Report: Financial Sources and Investment Appraisal for Zylla Limited

This report analyzes the financial strategies for Zylla Limited, a company providing ferry services. It examines both short-term and long-term sources of finance, including short-term loans, trade credit, term loans, and preference capital. The report also delves into investment appraisal techniques such as payback period, average rate of return (ARR), and net present value (NPV) to assess the viability of potential investments. Calculations for ARR and NPV are provided, illustrating how these methods can be used to evaluate the financial attractiveness of projects. The conclusion emphasizes the importance of financial planning and investment appraisal in business expansion and success.

Business Scenario
for
Individual Report
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Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY ..................................................................................................................................3
Short term and long term sources of finance..........................................................................3
Investment appraisal techniques.............................................................................................4
CONCLUSION................................................................................................................................6
REFRENCES...................................................................................................................................7
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INTRODUCTION
Business expansion is defined as a process in which a company grow its business
operations and function in order to increase stores by that they able to fulfil its potential and
targeted customers need by offering their products and services (Afoke and et. al., 2013). For this
financial sources plays main role because by it firm able to conduct project effectively.
Organisation selected for this report is Zylla Limited which is offering ferries services across
river for goods, people and vehicles. Topics that are included in respective report are short and
long term sources of finance as well as it will also explain about different investment appraisal
techniques which a company may adopt.
MAIN BODY
Short term and long term sources of finance
There are several types of sources of funding or finance which an organisation may adopt
such as retained earning, term loan, letter of credit, debt, equity, working capital, euro issues and
so on. Sources of finance are required for different by a company management in different
situations currently which they are going through as well as these source of finance are
bifurcated into two parts i.e. short term and long term. Some of the main short as well as long
term source of finance which Zylla Limited may adopt for expand their business and organizing
more ferries are explained below:-
Short term finance-
It is considered as that source of finance which are required for short time period,
normally for less than one year. Short term finance is also known as working capital financing
and a company required it when there is uneven cash flow in business, during seasonal pattern
and many other. Some main short tern finance which Zylla Limited can adopt are given below:- Short term Loan: It is consider as that loan which are scheduled to be repaid within a
year (Andor, Mohanty and Toth, 2015). By taking short term loan respective company
able to improve issues through cash flow, help in keeping with seasonal trends, aid in
expanding business, take care of emergencies situation and many more.
 Trade Credit: According to this technique of short term finance in which suppliers agree
to deliver goods on credit basis which mean company will buy product now and they will
pay for it later. By adopting this funding method Zylla Limited able to buy more ferries
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and they will pay for it later as well as it will also help them in expanding their business
effectively.
Long term finance-
It refers to that sources of finance where funds raised by a company for a long period of
time, normally for the more than one year. It is generally required for expanding business,
modernization, development of business operations, diversification and many more. In respect of
Zylla Limited they may adopt below given long term finance sources- Term Loan: It is defined as monetary loan that need to be repaid in a specific payment
mode over a particular time duration which can be normally for one to 10 years as well as
sometime it last for 30 years (Ezeokoli, Adebisi and Olukolajo, 2014). In respect of
respective company by adopting this method they can expand their business by increasing
their services of ferries across boarders.
 Preference Capital: These types of funding raised through issuing of preference shares.
It is also considered as hybrid form of financing in which there are certain characteristics
of attributes of debenture and some characteristics of equity. In respect of this Zylla
Limited can issues preference shares in order to generate preference capital for expanding
business.
These are main short as well as long term finance sources which Zylla Limited can adopt
in order to expand their business operations and services as well as they also use these sources of
finance for increasing its ferries related services.
Investment appraisal techniques
Investment appraising is defined as process which include various methods or techniques
that are used by a company in order to examine attractiveness of its investment. The main reason
behind adopting investment appraisal techniques is to determine assess viability or effectiveness
of project, portfolio decision, programmes (Singh, Jain and Yadav, 2012). Moreover, it will also
aid an organisation management in generating value of their project. There are numbers of
investment appraisal techniques that management may adopt such as payback period, internal
rate of return, net present value, accounting rate of return and many more. From which some
main investment appraisal techniques that may adopted by Zylla Limited are given below:-
 Payback Period (PP): According to this investment appraisal techniques a company able
to determine time period that generally required for retrieving initial cost of investment.
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Moreover it will also aid in analysing lower payback time that is determined as duly
proves information i.e. effective for business unit.
 Average Rate of Return (IRR): This is considered as a percentage rate of return which is
based upon investment or asset in comparison to initial investment costs. This utilised
when decision is done upon investment or an acquisition. (Wang, Huang and Shou,
2015).
ARR = (Average annual profit after depreciation / Investment) x 100
Average annual profit= (265202.95/5) =53,040.59
(53,040.59 / 150000) * 100 = 35.37
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
 Net present value (NPV): This is defined as tool or technique through which an
organisation can conduct deviation of present value of cash inflow or outflow (Wong,
2012). By adopting this firm can be determined its current value i.e. after investment.
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These are the main Investment appraisal techniques which Zylla Limited can adopt in
order to analyse its project related to business expansion as well as increasing ferries services at
domestic, national and international level.
CONCLUSION
By conducting analysis of above discussed point it can be summaries that while
expanding business operations and functions financial sources plays an essential role because
through it all related activities can perform properly. The sources of finance can be for short term
(Trade Credit and Bank Loan) or long term (Equity capital and Term Loan). Along with this,
there are several investment appraisal techniques which are used by a company in order to
evaluate validity of its project such as net present value, payback period, internal rate of return
and many other. These all will help an organisation in developing proper strategies related to
funding which lead to expansion of business successfully as well as effectively.
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REFRENCES
Books and Journals
Afoke, J. and et. al., 2013. Effect of source of funding on weight loss up to 3 years after gastric
banding. Surgical endoscopy. 27(4). pp.1219-1224.
Andor, G., Mohanty, S. K. and Toth, T., 2015. Capital budgeting practices: A survey of Central
and Eastern European firms. Emerging Markets Review. 23. pp.148-172.
Ezeokoli, N.B., Adebisi, O.S. and Olukolajo, M.A., 2014. The practice of investment viability
appraisal in Akure, Nigeria. Ethiopian Journal of Environmental Studies and
Management. 7(5). pp.581-587.
Singh, S., Jain, P. K. and Yadav, S. S., 2012. Capital budgeting decisions: evidence from India.
Journal of Advances in Management Research. 9(1). pp.96-112.
Wang, F., Huang, M. and Shou, Z., 2015. Business expansion and firm efficiency in the
commercial banking industry: Evidence from the US and China. Asia Pacific Journal of
Management. 32(2). pp.551-569.
Wong, J., 2012. Bank funding–the change in composition and pricing. Reserve Bank of New
Zealand Bulletin. 75(2). pp.15-24.
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