Financial Analysis Management & Enterprises Assignment Report

This report delves into the realm of financial analysis, exploring investment appraisal techniques and sources of finance. Task 1 focuses on investment appraisal, detailing methods like the payback period, net present value (NPV), and internal rate of return (IRR), with their respective advantages and disadvantages. The report uses a property company case study to apply these techniques, comparing small, medium, and large development projects. Task 2 shifts to sources of finance, discussing options such as financial institutions and factoring, alongside their benefits and drawbacks. The report provides a comprehensive overview of financial management, equipping readers with insights for strategic decision-making in investment and financing.

Financial Analysis
Management &
Enterprises

Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
Investment appraisal techniques..............................................................................................................3
TASK 2.......................................................................................................................................................7
Sources of finance...................................................................................................................................7
CONCLUSION.........................................................................................................................................10
REFERENCES..........................................................................................................................................12

INTRODUCTION
Financial analysis is defined as a means of analyzing company data accumulated over a
particular time frame. In other terms, the financial analysis is a part of the overall position of
management consulting that involves analyzing quantitative statistics to offer knowledge into the
current and future financial stability of a company. Financial analysis could be used in a wide
range of situations to include company managers with the information needed for strategic
decision taking (Adedayo, Sylvester and Amiolemen, 2019). Finance is the management for
organisation. Practically, company goals or priorities are set and measured monetarily.
Adaptability in the investment banking vocabulary, the capacity to digest and interpret financial
details and existing facts in the financial statements of the group are some of the abilities
expected to implement and operate a business. Each business requires the capacity to understand
financial information. In other words, this can be interpreted as a means of evaluating firms,
programs and expenditures with a view to determining the financial position of firms. In this
report consist of different investment techniques and critical analysis of methods of finance.
TASK 1
Investment appraisal techniques
Investment evaluation is a way for a organization to determine the value of future
investment products based upon the results from many specific working capital and funding
strategies. It is a type of financial accounting for investors, as it can better locate lengthy-term
trends and the potential performance of a company. There are several ways in which a company
can conduct acquisition evaluations, but below are three of the most important methods:
Payback period: The payback period in capital budgeting is the significant indication, or
key determinant, that almost all companies depend on to select among possible infrastructure
improvements. To evaluate it or not the payback period is favorable, managers must evaluate the
average payback period needed to regain the original expenditure costs. Based on a program's
estimated payback period, management may choose to either approve or reject the proposal. An
investment project will be accepted if the period of payback is less than or equal to the maximum
desired payback period for the management (Banera, Heley and Pylypenko, 2018).

Advantage: Smaller companies will have very restricted investors to purchase in
initiatives since they have to be super cautious with expenditure. This capital budgeting activity
is a scientific manner for a local company to make the decision conveniently which project will
most charge off. Often for a small company, in order to expand, you have to look primarily at the
income and financial management and the discounted payback approach will allow you to make
strong acquisitions.
If a company wants to recover its investment opportunities so that they can continue to
reinvest and expand, that process will make it easy and convenient. Users can choose which
investment decisions will lend you money the smartest, or most productively, using this relevant
data to make the appropriate investment opportunities. If it's really all about promoting business,
you would like the correct revenue streams to continuously have money from working for
ourselves (Dorgai, Fenyves and Sütő, 2016).
Disadvantage: This is an inherently short-term oriented financial planning strategy,
together with the reality that the payback method ratings focus solely on the immediate amount
of business. It'll also function well for any company looking to spend, pay back, and grow as
quickly as possible. Even so, if the organization is going for a more lengthy-term methodology to
venture development, there are some significant drawbacks with the discounted payback process.
It's not going to just be just how easily could get your funds refunded.
This method is somewhat extremely useful in fast-moving industries with a lot of
dramatic change. The major issue for most business owners is that they would need a good
structure of development projects so that they would all take good care of their simple, medium
and lengthy-term requirements. Neither company would be able to depend on this approach for
their alternative investments if they really want a prosperous future ahead of them. Using a
number of approaches is often best for making informed decisions.
Net present value: Net present value of cash inflows between the present value of cash
and the outflow of cash arises as a consequence of a capital budgeting being undertaken. This
may be optimistic, effectively zero. When the cash inflows are higher than the market value of
cash outflows, it is claimed that the current value is optimistic, and the growth strategy is deemed
acceptable (Fraser and Simkins, 2016). If the present value of the cash increase in the supply

factor is close to the current cash outflow worth, the return of investment is said to have been nil,
and the invested capital is considered appropriate.
Advantage: The benefits of net present value have included the assumption that it
recognizes the opportunity costs and allows the company's board in better decision-making,
while the downsides of present value provide the assumption that it does not take into account
the additional costs that cannot be used by the corporation to distinguish the two widths of
initiatives.
Net Present Value is a vital element of what is referred to as the "profitability index,"
which measures what a future transaction could bring to a business' value, offering an incentive
to determine whether an injection of capital will boost the company's profit line. If this number
returns optimistic, then companies believe that there is a potential. Then you can ascertain
whether the value that an institution or shareholder offers can support anybody working on the
project or get ended up losing with the whole of the move (Handayani, 2017).
Disadvantage: Although NPV suggest additional and a helpful way to determine the cost
of the project and its future return to income, it does have its disadvantages. Because no observer
has a time machine, any system of capital budgeting results from the risk of wrongly calculated
essential equation contributions and predictions, as well as unavoidable or unexpected incidents
that that impact the net income and cash streams of a venture.
When a project is first getting underway, working capital activities identify the accumulated
issues that come well before beginning date as a “sunk cost” Let's assume that an company has
production and innovation expenditures for a venture to compensate until it hits the revolutionary
phase of a project – so the R&D costs will qualify in the NPV ratio. Whenever the NPV operates
for the productivity index, it's doesn't comprise of these expenditures as part of the income
statement that get measured when calculating this ratio. Disregarding these costs will have a
huge effect on a company that involves refusing a funding proposal also because Net Present
Value information has been used (KISELAKOVA, SOFRANKOVA and HORVATHOVA,
2016).
Internal rate of return: The internal rate of return on a venture sometimes recognized as
yielding is the rate whereby an individual investor expects to yield over its lifespan. It is the

financial ratio over which the purchase price of the future cash flows of a task will become
comparable to its gross profit outflows' sales price. In many other terms, required rate of return is
the level of depreciation with which the present values value of the benefits is null. Manager
specifies the minimum necessary default rate. Almost all of the time, this is the firm’s capital
expense.
Advantage: The most desirable feature of this method is that interpretation after
calculation of the IRR is very straightforward. If the Getting higher the capital expenditure then
approve the proposal, not the other way around. For management teams this is very easy to
decipher, that's why it is advantageous except if they encounter occasional exceptional situations,
such as necessarily the same thing region specific ventures, etc (Maher, 2016).
Some of the greatest errors made with the internal rate of return approach are that this is
the only measure used to determine a feasibility of the project. This action brings with it a
number of possible benefits. The IRR approach of multiple measurement variables is best used.
This means, the positively or negatively proportions from this equation can be correlated with
other value drivers. That gives a better image of a given estimated economic wellbeing.
Disadvantage: Finance managers often run into a situation where the project under
consideration causes a temptation to participate in those other programs. For illustration, if they
engage in a large conveyor vehicle, you would also need to organize a parking spot. Such
ventures are labeled conditional or uncertain activities and have to be taken into consideration by
the administrator. IRR may allow the vehicle to be purchased but there is no incentive to invest if
the existing project positive effects are destroyed off by possessing to organize the parking spot.
Maybe the IRR computation's greatest flaw is that it’s arguable that positive cash flows
can be spent at same pace as the required rate of return. In fact, the amount that the IRR
generates can be very high. Generally the range of choices accessible that would produce very
returns is small at best, providing an impossible image for certain groups trying to optimize
potential working capital (Mishakov and et.al, 2018).

TASK 2
Sources of finance
Business finance sources are capital, bonds , debentures, portfolio investment, time
deposits, long term loans, credit letters, euro problem, investment financing etc. Those funds
outlets have been used in different circumstances. They are categorized according to time frame,
common ownership, and century source. Evaluating any source of capital until choosing for it is
optimal. Long-term financing can be characterized as any financial product with duration of
more than one year (including such mortgage loans, bonds, leases and other types of debt
financing) and institutions of internal and external capital (Podile, Janardhanarao and Sree,
2018). Short term funding shows defending for duration of only about one year. The need for
short-term financing exists in order to fund current economy assets such as inventories of raw
materials and finished products, debt holders, minimal account receivables etc. Short term
finance is sometimes referred to as working capital funding. The company wants to invest money
into super market so there are mention some methods of finance such as:
Financial institution: Business owners are given the option of borrowing from a
commercial bank. Commercial banks, like banks and credit unions, provide checking accounts to
companies which are just getting underway or that need financial help for upgrades or new
technologies. Big businesses must clear a permit process to apply for a mortgage. Many
investment banks allow organizations to send reports about how the money gets spent and why
the money is required. Interest on the mortgage can be paid for either a dynamic or a fixed price.
Advantage: New businesses that might find it hard to raise public finances can get that
from such organizations. Assistance services so if response is unworkable or unaffordable to
standard publications. Plans for modernization and development can be funded without very
much pressure on the firm's earnings framework.
Disadvantage: Such organizations often impose constraints on management autonomy.
In credit agreement, they set out a sovereign debt provision. In some situations, they plan on
keeping their finalists appointed to the lending company’s shareholders (Schilling, Haki and
Aier, 2018).

Factoring: In recent years, this form of funding has gained prominence, and is now
widespread. Factoring will provide a stable source of financing if the corporation has cash flow
issues, when buyers steadily paying their receipts. They can only use factoring though if they
operate with excellent credit for corporate and industrial clients. The line will increase the
working capital if it's used appropriately, and start taking on new customers. Here users can see
why it functions, and get a description. It can be a perfect choice for businesses with high
profitability and the only concern due to slow-paying customers is a shortage of cash flow. It is
reasonably quick to just get a factoring and the path is generally very versatile.
Advantage: This form of finance reduces the process of cash gathering. It allows for fast
cash realized by offering the retained earnings to a variable. Often the existence of liquid cash is
a determining factor in capturing or wasting a chance. Factoring regular paycheck is easily
accessible for capital spending, obtaining a market regime or trying to meet an unpredicted
situation (Serebryakova, Volkova and Volkova, 2017).
Disadvantage: The element would subtract the same discount from the price of the
accounts receivables as charges for the care offered. In addition the element also spends money
on the detailed outline in some situations. Additionally an individual's income is that by a
substantial amount.
Venture capitalist: Another form of funding is to identify a venture capitalist to finance
the company. Venture capitalists typically plan to spend in fast-growth companies and search for
businesses showing encouraging signs of a strong rate of return. Some of the advantages of this
approach of funding are that venture investors are not afraid to take chances, while commercial
banks tend to make loans to safer businesses. A traditional fund manager spends between
$500,000 and $10million, as per Entrepreneur.com.
Business loans: They are well-known goods where the company is funded by a loan. The
bank offers you a fixed amount of money in a mortgage, which is returned over such an amount
of decades. A line of credit offers a recurring service that could be used as required and given
directly on a daily basis-similar to a checking account. It can be challenging to get a mortgage or
a company personal loan. The point made of the bank is to get repaid in full. But their favorite
method of moving paid is by the working capital still created by the company. Consequently,

they can only offer funding if the business has an amazing track record of money production and
has sufficient assets. Lending and credit lines are a wonderful way of funding a company. Credit
lines are hugely beneficial when coping with cash flow constraints. After all, it is hard to procure
this type of funding, and is rarely a choice for small businesses with recent knowledge (Shadrin
and Leonov, 2018).
Advantage: A bank lends funds to a company depending on the cost of the company and
its apparent desire to function the loan by making effective and timely payouts. Apart from debt
financing where even the government decides shareholdings, financial institutions do not support
any candidate of ownership in a company.
Disadvantage: One of the main disadvantages of bank loans because they're very
unlikely to obtain until a business owner has proven record or important assets such as property
investment
Purchase order funding: Purchase order funding, including deferred revenue taking into
account, is a sophisticated type of financing which has gained popularity over the years. This is
planned to help businesses reselling products at a discount and need revenue to cover for their
distributors. The financing employer charges immediately to your provider that also facilitates
reader to meet big transactions. This approach can be very beneficial for high businesses which
have made a huge request and will need resources to pay the costs of the supplier. Given its cost
and certification variables, it tends to work for only high-margin exchanges and does not
necessitate brand customization. This source of payment tends to work unless the purchase is for
the reselling of manufactured goods and if the operating margin is 30 percent or greater. Even so,
if payment applies, the handling of cash orders without having to give up liquidity is a useful
platform. Eligibility for po funding is fairly easy, as is factoring (Sun, Lang, Fujita and Li, 2018).
Advantage: The spending large with the simple fact that, as a company owner, the
preferred taking into Account Company is passing a massive risk on. Almost all of the
complementary theoretical see failure to pay as an unknown outcome. That means, in regarding
the payment obligations, the business gets all the money it wants and they're still off the leash.
Disadvantage: One of the downsides is that when go for these choice citizens never get
overall amount. It's because the considerations very often begin taking a significant risk and that

is why a portion about what they guarantee is generally deferred and compensated only when the
purchases are due by the clients.
Traditional banking: Nearing a bank had been a popular way of funding a company
until around 10 to 15 years ago. Many national and regional banks are providing financing to
small businesses, normally in the context of revolving loan and credit sheets. If business is an
eligible applicant with 2 years in the industry underneath belt, a very good, successful credit
rating and a decent amount of annual sales could be a financial product for them. Find the best
corporate loan banks to see main choices could be for funding the company.
Business line of credit: A credit line is not all that dissimilar from a credit or debit card:
people have access to cash, and should need to can bring on such financial resources. They just
pay tax on the balance which probably takes out using for a business line of credit. When lender
has been repaid every fund of funding will be replenished to the previous amount. A cash flow
budget is wonderful for companies seeking a flexible finance alternative. They don't have to
think about the terms and conditions for set payment. But, be conscious that current accounts
have particularly brutal fines and penalties interest payments (Bhamblani and France, 2018).
Advantage: Often all companies, but particularly small companies, have to participate in
a balancing act when revenue lags behind in expenditures. A company line of credit helps to
pay bills on time and reap the benefits of periodic rewards for payments.
Disadvantage: Moreover, many company lines of credit bear secret issuance, processing
and servicing fees, not to mention insufficient funds (NSF) and missed payments penalties,
which dramatically raise costs. Thoughtfully check the small print prior to actually embracing
any.
CONCLUSION
From the above report it has been concluded that financial analysis of a business is
important that provide all the necessary information to the owner according to requirement.
There are analyzing by the different advantages and disadvantages of the investment appraisal
techniques. On the basis of these techniques company take decision in regard of the investment

that helps in business for future growth. Along with analysis the different methods of finance that
family select for the super market like financial institution, factoring and many others.

REFERENCES
Books and Journal
Adedayo, E. O., Sylvester, E. and Amiolemen, O. O., 2019. Does enterprise risk management
impact accounting quality? Evidence from the Nigerian financial institutions. Investment
Management & Financial Innovations. 16(4). p.16.
Banera, N.P., Heley, L. O. and Pylypenko, S. M., 2018. ANTI-CRISIS MANAGEMENT AS A
BASIS FOR IMPROVING FINANCIAL ACTIVITIES OF THE
ENTERPRISE. Financial and credit activity: problems of theory and practice. 3(26).
pp.102-112.
Dorgai, K., Fenyves, V. and Sütő, D., 2016. Analysis of commercial enterprises' solvency by
means of different bankruptcy models. Gradus. 3(1). pp.341-349.
Fraser, J. R. and Simkins, B. J., 2016. The challenges of and solutions for implementing
enterprise risk management. Business horizons. 59(6). pp.689-698.
Handayani, B. D., 2017. Mekanisme corporate governance, enterprise risk management, dan
nilai perusahaan perbankan. Jurnal Keuangan dan Perbankan. 21(1). pp.70-81.
KISELAKOVA, D., SOFRANKOVA, B. and HORVATHOVA, J., 2016. Impact of risks on the
enterprise performance in the European Union by using enterprise risk models. Journal of
Applied Economic Sciences. 11(3). p.41.
Maher, C., 2016. Career anchors of social enterprise managers in the UK-an empirical
analysis. Journal for International Business and Entrepreneurship Development. 9(4).
pp.398-416.
Mishakov, V. Y. and et.al, 2018. Management Technologies to Adapt Modern Principles of
Industrial Enterprise'Management. Journal of Advanced Research in Law and
Economics. 9(4 (34)). pp.1377-1381.
Podile, V., Janardhanarao, N. and Sree, C. H. V. S., 2018. Profitability analysis of a micro and
proprietary enterprise-A case study of nagas elastomer works. Asian Journal of
Multidimensional Research (AJMR). 7(11). pp.116-127.
Schilling, R., Haki, K. and Aier, S., 2018. Dynamics of control mechanisms in enterprise
architecture management: a sensemaking perspective.
Serebryakova, N. A., Volkova, T. A. and Volkova, S. A., 2017. Risk management as a factor
of sustainable development of enterprise. In Overcoming Uncertainty of Institutional
Environment as a Tool of Global Crisis Management (pp. 159-166). Springer, Cham.
Shadrin, A. S. and Leonov, P. Y., 2018. Risks evaluation of financial-economic activity and their
management in the system of economic security of the organization. KnE Social
Sciences, pp.427-435.