Financial Analysis and Investment Appraisal for COCO Limited Report

This report provides a comprehensive financial analysis of COCO Limited, a public limited company operating in the UK. The analysis encompasses an examination of the company's financial stability using various tools, including Net Present Value (NPV), Internal Rate of Return (IRR), break-even analysis, and cash budgeting. The report explores both internal and external sources of funding available to the company, evaluating their advantages and disadvantages. Investment appraisal techniques are applied to assess the profitability and feasibility of proposed projects. The report includes detailed financial data, calculations, and an evaluation of the limitations of the appraisal methods used. The findings suggest that COCO Limited can improve its financial stability by making strategic financial decisions. Finally, the report offers recommendations and conclusions based on the financial analysis.

MANAGERIAL
RESOURCES

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................2
Sources of funding......................................................................................................................2
Investment appraisal....................................................................................................................5
Cash budgeting............................................................................................................................8
Break even analysis.....................................................................................................................9
Evaluation...................................................................................................................................9
Literature relevant with Budgets and Break even analysis.......................................................10
Considering issues.....................................................................................................................10
Recommendation and conclusion.............................................................................................11
REFERENCES..............................................................................................................................12

EXECUTIVE SUMMARY
Determination of financial requirements in an organisation is the prime requirement
which in turn will be effective and helpful as per meeting the financial needs in the right time.
Present report is consists of analysing the financial stability of COCO limited which will be
measured through various financial tools. It will be comprised with ascertaining various
investment appraisal tools such as NPV, IRR, Break even analysis and Cash budgets. Moreover,
there will be suggestion relevant with how organisation can improve its financial stability.
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INTRODUCTION
Managing organisational funds and bring the financial stability in the operational
activities which will be effective and helpful as per meeting the goals of industry. Analysing the
factors will be adequate in terms of determining the profitability as well as ability of business in
making suitable changes in the operational practices. In the present research there will be
discussion based on financial issues relevant with COCO limited. Examination of various facts
through implicating NPV, IRR, Break even analysis and cash budgeting techniques in the
operations. The firm is known as public limited company that is listed on Alternative investment
market in UK and has been doing operating in various places for the last 5 years. It used to
provide intellectual property to financial services, HR consultants, marketing companies and
investment property capital all over in London.
Sources of funding
In relation with ascertaining various funds for the operations there are several sources of
funding which will be helpful as per meeting the suitable requirements of firm. It includes
internal and external sources of funding which will be appropriate sources on which COCO
limited can gather a required amount of funds (Al-Malkawi and Pillai, 2018).
Internal Sources:
COCO Limited can gather satisfactory level of funds for the sources through internal
sources which is comprised with various advantages and disadvantages. However, there will e
various internal sources of funds analysed such as:
Sources of funding Advantages Disadvantages
Owner's equity  It includes the funds which
were being invested by the
owner's of organisation which
are operating sole
proprietorship, partnership
etc.
 There is no need of making
payments to any interest over
 It will not be adequate and
appropriate as per meeting
requirements of funds in
all the operational
activities of firm.
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the spent funds.
Retained Earnings  These are the earnings which
were remained after making
payments to the dividends to
equity holders.
 It will be an appropriate
source which in turn will be
useful for making expansion
and diversification of sources.
 Through these sources the
firm make allocation of funds
in the variolous tasks or
operations.
 It has the biggest
disadvantage is that there
will be manipulation of
the funds or it will be
misused by professionals
in the organisation
(Garner, Kim and Yong
Kim, 2017).
 It involves over
capitalisation and tax
evasion on which firm
reduces their taxable
charges through it.
Debt collection  These are the amount which
the firm has not yet recovered
through debtors in the basis
of sales.
 Debt balance will be tax free
as there will not be any
charges against such
payments which are yet to
recovered by a firm.
 Collection of such debts will
be helpful in gathering the
appropriate revenue and gains
through such operations.
 It may affect the
consumers and buyer
relationship of the
business.
 In relation with such
activities there will be
reduction in level of sales
and it may affect the
numbers of consumers.
External sources:
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These are the sources through which COCO limited can gather the most appropriate and
satisfactory required amount of funds. It can be generated through external sources such as:
Sources of funding Advantages Disadvantages
Equity capital  By selling
proportionate equity of
a firm in the market
which will be effective
as per rising capital
structure of entity.
 Business professionals
will become able to
gather the satisfactory
amount of funds for the
operations which in
turn will be adequate
for improving brand
image in market.
 It will require
appropriate time for
proper decision making
as well as promoting
the operational
activities of firm.
 Firm has to make
payment for dividends
which will reduce their
profit generate in a
period (Wei, Xu and
Zeng, 2017).
Borrowings  It comprises with the
long term and short
term borrowings taken
by organisation a per
meeting the operational
needs in the right time.
 It will be beneficial as
company and people
will have satisfactory
amount of funds for
operations which
generate them desired
amount of funds.
 In relation with taking
loans from banks and
financial institutions
there will be
requirements of
making payments of
interest over such
borrowings.
 Loans and borrowings
has been brought by
the firm in against
security of its
ownership or any
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assets.
Governmental grants  To meet the financial
needs as well as
initiating business
operations the
government of various
locations are planning
to bring the satisfactory
amount of funds for the
operations (Pros and
Cons of Grants, 2017).
 It will be a helpful
source as there are no
requirements of
making payments to
any taxes over such a
collected amount.
 It will be a very time
consuming process as
government will grant
the money to
organisation as per
making various
investigation over
financial stability and
needs of business.
 There are most of the
grants are for short
term period which will
not be that satisfactory
as per meeting the long
term requirements.
Investment appraisal
Planning relevant with the expansion of business operations as well as implicating new
projects in the operational practices will be manages through estimating adequate capital
budgeting. Thus, investment appraisal will be helpful to the industries in terms of making
suitable control over operations as well as management of performance. It comprised with
various techniques such as NPV, ARR, IRR and payback period. Thus, determination of
profitability and fruitfulness of the proposed plan of COCO limited will be measured through
implicating such techniques in analysing the outcomes (Mansour and Bhatti, 2018). Moreover,
there will be discussion based on analysing advantage and limitation of various investment
appraisal tools.
Coco super:
Year 0 1 2 3 4 5
5

Sales revenue 100 1400 5000 4800 3800 3200
Less: 42 150 144 114 96
1442 5150 4944 3914 3296
Component A 580 500 820 860 1000
14.5 12.5 20.5 21.5 25
594.5 512.5 840.5 881.5 1025
Component B 1200 1050 1400 1800 1700
30 26.25 35 45 42.5
1230 1076.25 1435 1845 1742.5
Overheads cost 220 220 230 200 200
STO 1 328 328 328 328 328
11 9.9 8.91 8.019 7.2171
90.2 81.18 73.06 65.76 59.18
STO 2 182 182 182 182 182
14 12.88 11.8496 10.9 10.03
63.7 58.6 53.92 49.6 45.63
2198.4
1948.53
4 2632.48 3041.86 3072.31
Gross profit -756.4
3201.46
6
2311.522
32
872.1417
744
223.6855
48448
Annual capital portion @ 25% -189.1
800.366
5
577.8805
8
218.0354
436
55.92138
7112
PBT -567.3
2401.09
95
1733.641
74
654.1063
308
167.7641
61336
Corporation tax @ 19% -107.787
456.208
905
329.3919
306
124.2802
02852
31.87519
06538
Net profit -459.51 1944.89 1404.25 529.83 135.89
NPV analysis for Coco Super
Year cash flows Discounting factor @ 9% Cash outflows
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0
1 -459.51 0.917 -421.57
2 1944.89 0.842 1636.98
3 1404.25 0.772 1084.34
4 529.83 0.708 375.34
5 135.89 0.65 88.32
2763.41
Initial cost 13800
Net present value -11036.59
Coco Platform:
Year 0 1 2 3 4 5
Sales revenue 1680 5400 3960 3960 2880
Less: 50.4 162 118.8 118.8 86.4
1730.4 5562 4078.8 4078.8 2966.4
Component A 580 500 820 860 1000
14.5 12.5 20.5 21.5 25
594.5 512.5 840.5 881.5 1025
Component B 1200 1050 1400 1800 1700
30 26.25 35 45 42.5
1230 1076.25 1435 1845 1742.5
Overheads 220 220 230 200 200
STO 1 328 328 328 328 328
11 9.9 8.91 8.019 7.2171
90.2 81.18 73.06 65.76 59.18
STO 2 182 182 182 182 182
14 12.88 11.8496 10.9 10.03
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63.7 58.6 53.92 49.6 45.63
2198.4 1948.534 2632.47 3041.85 3072.3
Gross profit -468 3613.4 1446.3 1036.94 -105.9
Annual capital allowance @ 25% -117 903.3 361.5 259.2 -26.4
PBT -351 2710 1084.7 777.706 -79.43
Corporation tax @ 19% -66.69 514.9 206.1 147.76 -15.09
Net profit -284.31 2195.18 878.64 629.94 -64.34
Year cash inflows Discounting factor @ 11% cash outflows
0
1 -284.31 0.901 -256.1351351351
2 2195.18 0.812 1781.6573330087
3 878.64 0.731 642.4539952663
4 629.94 0.659 414.9609898529
5 -64.34 0.593 -38.1826584473
2544.7545245454
Initial cost 7600
Net present value -5055.25
Net present value:
This analysis is comprised with analysing the present value of future cash flows of the
organisation. Thus, on which firm's will become able to analyse the profitability and fruitfulness
of projected plans of business. On the basis of above listed measurements it can be said that
COCO Limited will have profitable gains as if they proceed the operations for COCO platform
project. It is because of less negative outcomes derived from such observation.
Limitation of NPV:
There are various disadvantage of this appraisal techniques such as it does not measure
the size the project and the outcomes derived from such analysis are mainly not being effective
as per having suitable analysis over the facts (Baker, Jabbouri and Dyaz, 2017).
Average rate of return:
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To demonstrate the probability of firm in relation with making the adequate efforts as
well as determining qualitative techniques which represent the profitability earned over projected
plan of business. COCO limited will be helpful and beneficial as if they implicate the use of such
techniques in making the profitable ascertainment of projects they are planning to have.
Limitations:
There can be various disadvantage of this investment appraisal techniques as it ignores
the time factors, it uses the alternative funds for operations (Neupane and Neupane, 2017).
Moreover, professionals at COCO Limited will not have reliable and accurate outcomes through
such techniques.
Internal rate of return:
These are internal rate of return over projected plans which comprised with the estimated
cash flows of firm. COCO Limited will be benefited as if the professionals will implicate the use
of this technique into operations. It brings the ability to compare the profitability of projected
plans and the return a firm will have over their investment amount in such plans.
Limitations:
Professionals at COCO limited will have suitable advantages in terms of acknowledging
the various limitation of these techniques (Sundarasen, Goel and Zulaini, 2017). It does not
consider the project duration and future costs which will not be helpful as per making further
expansion plans of business.
Cash budgeting
By considering the operational activities of COCO limited there has been analysis based
on examining the factors as well as making suitable changes into operational activities of the
firm.
Cash budget June July August
Sales Revenue
Strategy formulation 9310 9310 9310
Business planning 12600 12600 12600
Total profit 21910 21910 21910
Cash sales @ 40 % 8764 8764 8764
credit sales @ 60 % 0 13146 13146
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Total receipts 8764 21910 21910
Expenses
Staff Salary expenses 13300 13300 13300
Rent paid 5333.33 5333.33 5333.33
Administration expenses 4533.33 4533.33 4533.33
Marketing cost 3266.66 3266.66 3266.66
Insurance received 1666.67 1666.67 1666.67
Business Rates expenses 1000 1000 1000
Loan Interest amount 840 840 840
Electricity and Gas 400 400 400
Telephone expenses 266.67 266.67 266.67
Total payments 30606.66 30606.65 30606.65
Surplus/Deficit -21842.66 -8696.6 -8696.6533
Cash at the Opening balance 3000 3000 5696.6533
Closing balance 3000 -5696.7 -3000
Break even analysis
By considering the sales and the relevant costs associated with the business operations
which in turn will be effective and helpful in determining Break-even analysis of entity. Thus,
the below listed analysis reflect BEP of COCO Limited.
Sales revenue 581 581 581
Variable cost per units 428 428 428
Total Contribution 153 153 153
Total expenditure 30607 30608 30609
Total units 200 200 200
Sales (BEP) 15000 15000 15000
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Evaluation
According to the all above information, it has been seen the overall performances of the
company is all about providing positive results during the period. All the sales and earning can
be enhanced in more reliable and efficient manner to attain more suitable profitability in coming
period. Moreover, in relation with managing BEP of firm there is needed to have proper
execution over the financial and operational practices of business.
Literature relevant with Budgets and Break even analysis
By considering the fruitfulness of various analysis it can be said that there are various
operational techniques which will be helpful as per bringing the suitable measurement on
financial data set of firm. Moreover, COCO Limited will have satisfactory gains in the required
period as per ascertaining the most suitable analysis over operations.
Break Even analysis:
According to Al-Malkawi and Pillai, (2018), to have the most appropriate information
regarding firm's sales, variable and fixes costs which will be assistive as per uplifting appropriate
analysis over businesses. The level of commercial activity at a given period of total cost and
earning of business within an organisation. This evaluating performed at internal part of a
business planning which is observed the reality which is being states at individual idea that does
not be implemented for increasing profitability position of an organisation
Budgets:
As per the views of Wei, Xu and Zeng, (2017), Budgetary techniques are to be used by
professionals which in turn will be effective and helpful as per monitoring the financial activities
of firm. Here, professionals of various industries will make appropriate analysis over fund
requirements of business on which they will be helpful as per making appropriate study over the
facts. It will be helpful too, in terms of analysing funds requirements as well as making
alternative solutions to reduce the costs implicated in various activities.
Considering issues
In order to remain for longer period of time in the market. There are certain issues can be taken
into account in reliable manner. Some of them are mentioned underneath:
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 Check of proper planning before execution: Make proper compulsion with overall
performances and take deep analysis of all crucial aspects those are reliable for better
future.
 Maintain regular record and valuation: They cannot be complacent though assuming
all above data which is being presented in front of the investors to detect leader’s
weaknesses.
 Quality would not be an option, it would be necessities: Proper estimation with proper
demand and supply can be lead to detect losses that can make huge impacts on the
performances (Baker, Jabbouri and Dyaz, 2017). There is stock valuation that is major
problems of scrap and wastages during an accounting period.
Recommendation and conclusion
From the above project report, it has been concluded that managerial finance is utmost
crucial expected which will be needed to be analyse overall financial position of the company. It
has been summarising all specific description of capital sources those are divided in two
categories such as external or internal sources. Certain investment proposal tools are also being
analyse by using NPV, IRR and ARR. Further, this has been suggested that overall margin can be
assist them for valuable finding for present issues those are arises in an organisation are
evaluated in more perfect manner.
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