Zylla plc: Analyzing Working Capital & Investment Appraisal Techniques

This report discusses various short-term and long-term sources of finance available to Zylla plc to meet its working capital requirements and facilitate business expansion. It also explains investment appraisal techniques, including Net Present Value (NPV), Payback Period, and Accounting Rate of Return (ARR), to evaluate the viability of potential investments. The analysis recommends investing in a new ferry based on positive cash flows and a favorable payback period. The report concludes that business finance is crucial for operations and expansion, and investment appraisal techniques are essential for informed decision-making. Desklib provides access to similar solved assignments and resources for students.

TASK 4

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Discuss short term and long term source of finance to meet working capital requirements...3
2. Explanation of investment appraisal techniques and provide recommendations on the
viability of the investment...........................................................................................................4
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Business finance refers to the funds and credits which employed in the organisation to
their operations. Business finance is an important aspect for any organisation (Jordanoska, 2018).
It include management and control over the finance related activities of the firm. In this report,
various sources of finance are discussed which help Zylla plc to run their day to day operation
and also help in expansion of the business. These sources includes short term as well as long
term source of finance. Further, investment appraisal techniques are discussed to opt out the best
suitable investment for Zylla plc. There are three methods of capital budgeting is applied to
calculate the future profitability of the initial investment. A recommendation is also provide for
the company to select best investment.
MAIN BODY
1. Discuss short term and long term source of finance to meet working capital requirements
Source of finance refers to the ways by which a firm collect money to run their day to day
operations (Kong and Xin, 2019). There are various sources available in the market which satisfy
the need of funds of Zylla plc to meet working capital requirements. Here are various financial
sources which provide funds to the company for expansion purpose
Short term source of finance:
 Share: Zylla company can issue shares to the market by inviting them to purchase a part
of their ownership. This is a permanent source of capital where company do not need to
pay anything in return. Equity shares represent the ownership in a company. Equity share
holders are the owners of the company because they have a part of ownership by
investing in shares.
 Debentures: It is a most common source of finance which a company can raise fund
rapidly. Debentures are represented as a loan taken form the public and it is also known
as debt capital. The amount raised by the company through debentures has to repay in a
predetermined time period with the interest amount. It is most suitable for Zylla plc to
purchase a new fairy because they raise huge capital in shorter period.
Long term source of finance

 Bank loan: It is a most suitable method of raising funds by paying low rate of interest. It
is given by the banks and other financial institutions for a shorter period of time.
Company can take loan by depositing securities in the bank (Le, 2019). It has to pay loan
instalments with the amount of interest on monthly basis.
 Overdraft: This is another source of finance which helps company to generate funds. It
is a facility provided by the bank to its current account holder. Current account refers to
the account which is opened by the businessman or the institutions to run their business
transactions. It is given for a limited time and taken by the firms when they do not have
balance in their current accounts. This helps zylla plc to operate their routine functions or
activities.
2. Explanation of investment appraisal techniques and provide recommendations on the viability
of the investment
Investment appraisal technique refers to the methodologies which is helpful for business
organisation to measure the attractiveness of possible investment with the help of various
financial and capital budgeting techniques (Sandberg, 2018). It is type of financial analysis
which helps business to determine the best profitable investment for the future growth and
expansion. There are various methods by which Zylla plc can measure the suitability of the
investment project which are discussed below:
Net present value: It is a important and most common method of investment appraisal
technique. It measure the difference between the current value of cash inflows and the current
value of outflows for a period of time. It is helpful for the organisations to examine best possible
investment which generate huge profits in the future. The computation of net present value
method require estimation of future cash flows for every time and measure the discount rate.
This method is applied in various project at a same time. Zylla plc also apply this method to
measure the present value of both the projects and the calculations are below:

Payback Period: It is another method of capital budgeting which measure the time to
reach break even point of any investment or project. In other words, it measure the time taken by
the investment or project to recover its cost which incurred in the investment. It is mainly used
by investors or financial professionals to measure the investment returns.

Accounting rate of return- It determines the amount of return that can be received from the
investment made in the business (Weber, 2019). But it does not takes into account the time value
of money while calculating the amount of profits.
Analysis and recommendation: From the above calculation it states that Company needs to
make investment in a new ferry. The current value of investment project is equal to the total of
all present value of cash flows for five year is £ 209943. Company has positive cash flows for
the entire life of a fairy which shows that investment in new fairy is beneficial for the company.
According to the calculation of payback period it states that investment of new fairy takes 2.4
year to recover its initial cost which is favourable for the company. It recover its cost very
rapidly and also generate profits in future.
CONCLUSION
From the above report it can be concluded that the business finance plays important role
in the business activities and it is not possible for any firm to run their operation without any
finance. There are various sources of finance available in the market which helps business
organisations to raise capital to run their operations and also expend them. These sources can
arrange funds for short period of time or long period of time. Further investment appraisal
techniques are important for business because they provide clear view about any project and its
viability before investing into it. Net present value is very effective method which plays
important role in decision making.

REFERENCES
Books and Journals
Jordanoska, A., 2018. The dark side of finance: Policing corruption through regulatory means.
In Corruption in Commercial Enterprise. (pp. 163-181). Routledge.
Kong, D. and Xin, Q., 2019. Corporate finance in China. China Finance Review International.
Le, B., 2019. Working capital management and firm’s valuation, profitability and risk: Evidence
from a developing market. International Journal of Managerial Finance.
Sandberg, J., 2018. Toward a theory of sustainable finance. In Designing a Sustainable Financial
System. (pp. 329-346). Palgrave Macmillan, Cham.
Weber, O., 2019. Sustainable finance and the SDGs: The role of the banking sector.
In Achieving the sustainable development goals. (pp. 226-239). Routledge.
Yu, W. and et.al., 2021. Integrating big data analytics into supply chain finance: The roles of
information processing and data-driven culture. International journal of production
economics. 236, p.108135.
Zhang, M. and et.al., 2021. The impact of information integration on purchase order finance and
new product launch: A case study. International Journal of Operations & Production
Management. 41(4), pp.359-382.