Investment Appraisal and Financial Ratio Analysis of Greenergy Ltd

This report provides a comprehensive financial analysis of Greenergy Ltd, a UK-based energy supplier, using various financial ratios and investment appraisal techniques. It benchmarks Greenergy Ltd against British Gas, a proxy company, by calculating profitability, liquidity, gearing, and investor ratios to assess its financial health and efficiency. The analysis includes the application of methods like CAPM (Capital Asset Pricing Model) and DVM (Dividend Valuation Model) to evaluate investment opportunities. The report concludes that British Gas demonstrates stronger financial performance compared to Greenergy Ltd based on the analyzed ratios. Ultimately, the report aims to aid in making informed investment decisions by evaluating Greenergy Ltd's financial standing and potential investment projects, with the goal of selecting the right project for the company.

International Finance

INTRODUCTION
International finance is described as the accumulation of relationships for the development
and utilisation of assets necessary for global organisations and governments' overseas economic
activities. In the money perspective, commodities are defined as cash; nevertheless, money as
property, for instance, the quality that adds value, is not addressed (profit). This report based on
the Greenergy Ltd which is a privately owned energy supplier based in the United Kingdom. The
company provided different services like natural gas, energy generation and electricity sales to
homes and businesses along with nation. In this report mentioned of different task like cost of
capital, calculation of ratios, apply method of CAPM and DVM. Along with apply different
investment appraisal techniques that help to select right project for the selected company.
PART A
Introduction of Proxy Company
British Gas is a UK-based energy and companies providing supplier. It is the registered
trademark of Words in context businesses British Gas Services Limited and British Gas New
Heating Limited. British Gas is the largest energy provider in the kingdom, supplying
approximately 12 million households, and is regarded one of the Big Six controlling the natural
gas and electricity industry in the United Kingdom.
Ratio calculation of Greenergy Ltd and British gas
Profitability ratio
Net profit ratio: This percentage is used to calculate profitability ratios. Whenever Greenergy
Ltd and British Gas were compared, it was determined that Greenergy Ltd's net earnings will be
43 percent in 2020 and 2021, while British Gas's will be 100 percent in 2020 and 99 percent in
2021. These show that the proxy company, British Gas, has a high payout % than the
comparative company, Greenergy Ltd. This indicates that the proxy's financial status matches the
standards and that profitability is maintained.
Return on capital employed: This ratio evaluates a company's financial status in regards to
revenue generation and resource use effectiveness. Greenergy Ltd's ROCE is 43 percent in 2020
and 17 percent in 2021, while British Gas's ratio is 84 percent in 2020 and 78 percent in 2021.

This indicates that the substitute company outperforms the measuring company in terms of
financial outcomes. Similarly, British Gas is expected to show a steady decline in 2021, with a
smaller percentage, but it will nonetheless perform well when comparison to the benchmarking
firm.
Liquidity ratio
Current ratio: This ratio evaluates a company's liquidity status by determining how effective it
is or whether it has sufficient current assets to pay its current liabilities. This proportion could
also be employed to evaluate a company's competency in regards of examining its exercise
abilities or proving that the company has enough funds to meet its regular obligations. British
Gas's current ratio is 1.97 in 2020 and 2.08 in 2021. This indicates a high and rising current ratio,
showing that the company's trustworthiness and ability to meet its current obligations is growing.
It reflects the firm's solid cash position.
Gearing ratio
Debt equity ratio: The ratio measures the commitments of borrowers, shareholders, and
proprietors to the firm's investment gains. Greenergy Ltd's ratio will be 4% in 2020 and 2021,
while British Gas's ratio will be 3.81 (29/76000) in 2020 and 4.60 (52/113000) in 2021.
Especially compared to the comparison company, this reveals that the proxy firm's earnings is
minimal. This is true because British Gas' debt ratio is decreasing from 2020 to 2021. This
means that the company is not able to meet the criteria.
Investor ratio
Return on equity ratio: The rate of return that shareholders would receive on their ownership of
ordinary shares is represented through this ratio. In the case of Greenergy Ltd, the ratio in 2020
is 36%, but somehow it falls to 14% in 2021. The proportion is declining as contrasted to British
Gas, but more slowly than the benchmark company, with 84 percent in 2020 and 77 percent in
2021. This indicates that the proxy business performs better when compared to the equivalent
enterprise.
Earnings per share: It determines how much net profits will be used to compensate ordinary
stockholders. A rise in the business earnings per share (EPS) shows that business operations are

doing well. Whenever Greenergy Ltd. was analysed, it was found that the ratio was falling since
it was 360.74 in 2020 but only 144.74 in 2021. In contrast, British Gas had a ratio of 85.33 in
2020 and 115.684 in 2021. It indicates that, in comparison with the reference company, the
proxy company's performance is solid and positive.
In summary, utilizing accounting ratios to compare the financial records of Greenergy
Ltd (the benchmark business) and British Gas (the proxy firm), that becomes clear that British
Gas would be more profitable and efficient than the reference company. This also suggests that
the proxy business is achieving solid financial outcomes and meeting the criterion. The company
is able to achieve their objectives in specified time period. In 2021, household energy delivery
brought British Gas revenues of 115 million British pounds. Energy company claims it is
spending £50m ($61.7m) in helping consumers through to the present cost of living crisis,
including subsidies of up to £750 and the hire of 500 new client support personnel, in response to
charges of profiting in the energy sector.
CONCLUSION
As per the above report it has been concluded that The definition of international finance as
the combination of financial interactions formed as a result of economic arrangements -
exchanges, overseas commerce, investment - between residents of a country and residents of
other countries is incomplete. It cannot represent all basic provisions, which are created by a
collection of external factors that have a tangible influence on the organization’s activities.

REFERENCES
Books and Journal