Report on Investment Decision-Making: ABA plc's Financial Analysis

This report examines the investment decision-making process of ABA plc, a UK-based cycle company. It begins by calculating the Net Present Value (NPV) and payback period for two potential projects, ultimately recommending Project B based on its superior NPV and shorter payback period. The report then delves into financial factors, including inflation and interest rates, and their impact on investment decisions. Furthermore, it explores non-financial factors such as Brexit, staff motivation, and management strategies, highlighting their influence on ABA plc's business outcomes. The analysis underscores the importance of considering both financial and non-financial elements when making business decisions to achieve company goals. The report concludes by emphasizing the interconnectedness of these factors in shaping effective investment strategies.

BUSINESS DECISION-
MAKING

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Calculation of Net Present Value.................................................................................................3
Calculation of Payback period.....................................................................................................4
Financial Factor:..........................................................................................................................5
Non Financial Factor:..................................................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
In business decision-making is important factor and it helps company to rise their profits. This
report help to analysis ABA plc business investment decision-making. ABA plc is branded cycle
company which is operating in UK. It sells cycles and electric cycles. This report help to analysis
the result of pay back and NPV it also explains NPV and pay back period and in the end it
evaluates different financial and non financial factors which effect business decision-making.
MAIN BODY
Calculation of Net Present Value
Net present value:
It refers to the value obtained from making an investment. It helps in assisting the future net cash
inflows and outflows related with the associated investment.
Project A
Year Cash flow PV factor @ 16% Discounted Cash flow
(in €)
1 35000 1.16 40600
2 40000 2.32 92800
3 45000 3.48 156600
4 80000 4.64 371200
5 92000 5.8 533600
Total Discounted Cash Flow 1194800
Less: Initial investment 140000
NPV 1054800
Project B
Year Cash flow PV factor @ 16% Discounted Cash flow

(in €)
1 46000 1.16 53360
2 55000 2.32 127600
3 60000 3.48 208800
4 80000 4.64 371200
5 100000 5.8 580000
Total Discounted Cash Flow 1340960
Less: Initial investment 180000
NPV 1160960
As the NPV of project B is more than project A so Project B will be selected.
Calculation of Payback period
Payback period:
It refers to the number of months or year which is required to return the initial investment.
Project A
Year Cash Flow Cumulative Cash Flow
1 35000 35000
2 40000 75000
3 45000 120000
4 80000 200000
5 92000 292000
Cumulative Cash Flow= cash flow of previous year+ cash flow of current year
Payback period = 3+ (140000-120000)/80000

= 3+ (20000)/80000
= 3.25 years.
Project B
Year Cash Flow Cumulative Cash Flow
1 46000 46000
2 55000 101000
3 60000 161000
4 80000 241000
5 100000 341000
Payback period = 3+ (180000-161000)/80000
= 3+ (19000)/80000
= 3.24 years.
Since the payback period of Project B is less than project A, thus, Project B will be selected.
Financial Factor:
It includes different elements which affects business decision-making such as inflation
rate, interest rate, initial investment and source borrowing etc. These factor affect business and it
plans and its growth.
Inflation Rate: In simple terms it is general price of product in a country. Inflation rate is one of
the important financial factor that affect investment decision-making (Yuniningsih, Pertiwi, and
Purwanto, 2019). It varies country to country as it is the rate that in which rises in price s of
goods and services in an economy occurs. |It is the main factor that affect the cost of living and
also can make changes in prices of goods and services. Current inflation rate of UK is 0.77 and it
can affect ABC company’s investment decision-making. Rising inflation can decrease values of
its future fixed cash flow so it needs to consider this factor.

Interest Rate: It affected investment and its decision-making in the company. In ABA Company
investment is a heterogeneous activity. It is the ratio of gross tangible investment to value added.
Interest rate affect company decision and planning because if interest rate is high their company
profit margin is low and if interest rate is lower than profitability increase so overall interest rate
affect business and its decision-making and planning.
Initial Investment: This incudes initial amount which is required to start the business. It
includes careful estimation and investment which help business to start. It impacts business
decision-making and planing.
Non Financial Factor:
Same as financial factor non financial factor also affect ABA company business decision-
making. It also includes different factors which affect business position in market such as Brexit,
Staff morale motivation and management strategies etc. Non financial factor consider different
key elements which are meeting requirement of current and future legislation, improving staff
morale, improving relationship developing capabilities etc.
Brexit: It is refers to the withdrawal of UK. It also affects ABA business decision-making.
Brexit is created uncertainty in the firm (Rezaee, and Tuo, 2017). It decreased productivity and
reduce investment of the company. It is affect business and its growth it is in the top factor by
business face uncertainty. Productivity of the company slowly decreases. ABA company
growth rate is lower in productivity after the Brexit vote.
Staff motivation: It helps in business decision-making. Motivation play important role in any
organization and business. In business decision-making motivation help ABA company to
maintain their position in market and also help employees to stay motivate and inspire. Quality
of management also increased and reflect planing and decision-making activities. It also helps to
develop and increase employees knowledge and skills and subjective attitudes. Decision making
and motivation are interconnected and influence each other. Staff motivation is necessary in
effective decision-making. It also helps in diffract factors such as access to tasks, access to the
activity, access to the circumstances and access to the result of this activity. ABA organization
decide changes by various strategies such as ,
Changes in organization structure, changes in numbers and structure of employees and
their work performance, planning and decision-making as the starting point of changes and

communication and motivation as a process. Staff motivation help organization to change their
environment and also help business in decision-making.
Management Strategies: It helps organization in investment and in decision-making.
Management strategies influence and also help in effective control in different business activity.
It provides right direct to ABA organization and it also gives proper training to their employees.
Different management strategies help company to analysis their position in market these analytic
help business in decision for higher performance and for increase productivity and also to
increase profitability (Kimmel, Weygandt, and Kieso, 2018). It also helps organization in proper
planning that they can provide their product to customer all management strategies also help in
skills development of their employees for that they provide training and these trainings help
employees to give higher performance to the company.
CONCLUSION
From the above report it is concluded that whenever a business decision has to be taken both the
financial and non financial factors has to be considered. Since these factors are associated with
the goal of the company so every company have to consider these factors before take any
decision.

REFERENCES
Books and journals
Yuniningsih, Y., Pertiwi, T. and Purwanto, E., 2019. Fundamental factor of financial
management in determining company values. Management Science Letters. 9(2).
pp.205-216.
Rezaee, Z. and Tuo, L., 2017. Voluntary disclosure of non-financial information and its
association with sustainability performance. Advances in accounting.39. pp.47-59.
Kimmel, P.D., Weygandt, J.J. and Kieso, D.E., 2018. Financial accounting: Tools for business
decision making. John Wiley & Sons.
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