Financial Management Report: Financing and Appraisal for Zylla Ltd

This report provides a comprehensive financial analysis of Zylla Ltd, focusing on the company's expansion plans through the acquisition of a new ferry. It begins with an introduction to financial management and its role in the organization. The core of the report examines both short-term and long-term financing options available to Zylla Ltd, including trade creditors, bank credit, installment credit, equity financing, and corporate bonds. Furthermore, the report evaluates various investment appraisal techniques, such as payback period, accounting rate of return, net present value (NPV), and internal rate of return (IRR), to determine the financial viability of the new ferry project. The report includes practical calculations and working notes to support the recommendations and concludes with a summary of the key findings and recommendations for Zylla Ltd's financial strategy.

Individual Report
(Task 4)

Table of Contents
INTRODUCTION...........................................................................................................................3
Short term and long term source of finance to funds the acquisition .........................................3
Evaluation of different appraisal techniques and recommended the operation of new ferry......4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Financial management is the process which help in managing and controlling the
monetary activities present in the organisation . The present report is based upon the Zylla
limited which operates number of ferries which help in providing river crossing services for the
people (Hishammuddina and et., al., 2019). The company carries out vehicles, goods and
services prospect for the expansion. Firm has decided to buy new ferry which cater the increase
the demand as well as revenue for the organization. Further this report covers short and long
term source of finance to carry out the operational activities smoothly. Apart from this it involves
different appraisal techniques which is used in the organisation to motivate and encourage the
employees in a well define manner.
Main body
Short term and long term source of finance to funds the acquisition
The source of finance help the organization to expand the business effectively and also
help in developing sustainable business model in the well define manner. After the formation a
enterprise require the fund to expand and grow and earn profit for the longer time period. The
main purpose of short term loan is to facilitates the smooth running of the business by meeting
day to day financial requirements. It also enables firm to hold the stock of the raw material and
the finished goods. Short term finance become more essential when it is necessary to increase
the volume of the production in the shorter time span. Here are some of the short term loans
which can be beneficial for Zylla to expand the business:
Trade creditors: This kind of credit are often give to manufacture and individual who
supply goods to organisation. Usually these kinds of business gain the credit of 30 to 90 days.
For the organisation like Zylla this is essential for the firm to take loans as this help in providing
support to expand the business in effectively manner. As this beneficial for the small business to
increase the value and productivity of the company. It help the organisation to fulfil their
working capital requirement in order to complete daily activities of operations.
Bank credit: Commercial banks grant short- term finance to business firms which is
known as bank credit. Zylla should use these kinds of loans for the shorter time period. When the
bank credit is granted the borrowers gets the right to draw the amount of the credit at one time or
in the instalment when ever needed. Bank credit may be granted by way of loans, cash credit,

overdraft and discounted bills. Further this help in fulfilling the capital requirement which help
as bank provide loans at the lower interest rate organisation.
Instalment credit: This is a loan which is given for the fix amount of money. The
borrowers agree to make a set number of monthly payments which should be paid by the
individual who take the loan. For the organisation like Zylla this is one of the easiest method
which help in taking loan and which is beneficial for the company to give money in instalment.
Long term loan:
It is the financing which is usually needed for acquiring the new equipment, research and
development along with cash flow (Nejad Toolami and et., al., 2019). The organization like
Zylla can use such kinds of method which tend to run the organization in a smooth manner.
There are some of the factor of long term are explained below:
Equity financing: These are the financing which mainly preferred stocks and the
common stock of the firm. This can by use Zylla as it is consider as less risky in respect to cash
flow commitments. However equity financing often result in dissolution of the share ownership
and it also help improving earnings. Hence these kinds of financing hurdles the rate of
investment and may cancel reduction of cash flow. Zylla limited can use equity financing to buy
ferry as this require small budget to expand the business. The entity can use this financing by
provide the shares in the market which will help in raising the funds for expansion of the
company.
Corporate bond: A corporate bond is the special kind of bond which is issued by the
corporation to collect the money effectively and aim to expand the business to the larger
audience. For the organization like Zylla it is crucial for the company to issue the corporates
bonds as these are consider as safe and secure source of funding. These type of bonds are
convertible and company can purchase new ferry and expand there business effectively.
Evaluation of different appraisal techniques and recommended the operation of new ferry
The investment appraisal techniques are use to appraise the performance of the new
project. In the case of Zylla the company is launching new ferry in order to provide better
services and expand the business effectively. This kind of investment method involves internal
rate of return, accounting and many more. Various appraisal techniques can be useful as this help
in expansion of business effectively and useful in managing the new operation smoothly(Sun and
et., al., 2019). Here are some the techniques which are stated below:

Payback period: It is one of the easy investment appraisals techniques in the payback
method. This states how long it will take for the project to generate enough amount of cash in
order to cover initial cost of the project. In the context of Zylla this is essential for the
organisation to set a payback period for buying new ferry as the amount generated will be paid
back as the agreement done by the bank. Hence this process make company more benefit for the
company to set the pay time as this will reduce the burden from the business entity.
Accounting rate of return method: This is the method which is used to measure the
profit expected from the investment. Zylla finance team can focus on such kinds of method as it
help in expressing the net accounting profit arising from the investment as the percentage of the
capital investment. For example if the company is buying new ferry which cost around 150,00£
which will bring the five year sales will be around 45000 which is beneficial for the company.
Practical aspect for Zylla Limited:
Payback Period (PP): It is refer to the time period which required to recover the initial
cost of investment. Lower payback period will be selected because it is beneficial for the
company.
Payback Period = Cost of Project / Annual inflow
Cost of Project = Investment – Scrap Value
Net present value (NPV): It is the difference of current value of cash inflow or current
value of cash outflow. It help the organisation to measure their present value after the investment
(Laird and Venables, 2017).
NPV (Net Present Value) = Cash Inflow – Cash Outflow
Internal Rate of Return (IRR): It is a interest rate where all the cash flow of net present
value is equals to the zero. Basically is used for the evaluation which provide the information
weather project is beneficial or not to invest.
Calculation:
Year Cash flow PV @ 3% DCF
0 -150000 1 -150000
1 55230 0.971 53628.33
2 70045 0.943 66052.435
3 88375 0.915 80863.125

4 79870 0.888 70924.56
5 57555 0.863 49669.965
5 45000 0.836 37620
NPV 208758.415
IRR 34.14%
Payback Period 1.49
*Working Notes: -
Cost of Project = Investment – Scrap Value
= 150000 – 45000
= 105000
Annual Inflow = 55230 + 70045 + 88375 + 79870 + 57555 / 5
= 351075 / 5
= 70215
Payback Period = Cost of Project / Annual inflow
= 105000 / 70215
= 1.49 years.
As per the given statement this has been identified that the firm should use accounting
rate of return method as this will provide huge benefits to the company along with the proper
investment this will aid to manage the account and also track the inflow and outflow of cash
properly.
CONCLUSION
From the above stated report this has been clearly mentioned that organization must use
proper planning in order to expand the business in the well define manner. Further firm should
make use of short term loans as this not require large amount of investment. Along with this
entity must accounting method which will aid in making good profit for firm.

REFERENCES
Books and Journals
Hishammuddina and et., al., 2019. Energy Demand and GHG Emissions by 2030: A Scenario
Analysis Using Extended Snapshot Tool towards Sustainable Low Carbon
Development in Pengerang. CHEMICAL ENGINEERING, 73.
Nejad Toolami and et., al., 2019. The Survey of Whistleblowing Intentions for Accounting
Frauds Based on Demographic Individual Differences among Accounting
Staff. International Journal of Finance & Managerial Accounting, 4(14), pp.1-13.
Qosim, A., Anies, A. and Sunoko, H.R., 2019. Empirical Scenarios of Emission Control and
Economic Sustainability for Energy Input and Intervention of Agricultural
Pesticides. International Journal of Energy Economics and Policy, 9(4), pp.91-96.
Rivera-González and et., al., 2020. Long-Term Forecast of Energy and Fuels Demand Towards
a Sustainable Road Transport Sector in Ecuador (2016–2035): A LEAP Model
Application. Sustainability, 12(2), p.472.
Sun and et., al., 2019. Characteristic analysis and forecast of electricity supply and demand in
APEC. Global Energy Interconnection, 2(5), pp.413-422.
ONLINE
Julia Kagan 2019< https://www.investopedia.com/terms/t/trade-credit.asp>