Business Studies: Financial Decisions and Investment Appraisal - Zylla

This report analyzes the financial decisions of Zylla Limited, a company established in 1985, focusing on short-term and long-term sources of finance for acquiring a ferry and covering working capital needs. It evaluates various investment appraisal techniques, including accounting rate of return, payback period, profitability index, net present value (NPV), and internal rate of return, ultimately recommending NPV as the most suitable method. The NPV calculation demonstrates a positive value, indicating that the projected investment is financially viable and beneficial for the company. The report concludes that business studies, particularly investment appraisal techniques, play a crucial role in sustaining a company's profitability and popularity by enabling effective decision-making and alignment with consumer needs.

Introduction to
Business Studies

Table of Contents
INTRDUCTION..............................................................................................................................3
TASK...............................................................................................................................................3
Short term and long term sources of finance to fund the acquisition of the ferry and for the
company's working capital needs................................................................................................3
An evaluation of various investment appraisal techniques and recommending the viability of
the acquisition and operation of the new ferry based on one suitable investment appraisal
technique using the data..............................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRDUCTION
Business study is defined as an research or the set of actions which is applied by
particular organization for removing various difficulties in their operational activities. Due to
conducting deep research by the organization they are able to facilitate best quality services and
products to customers according to their desires and wants in time. The other advantage for
conducting deep research by firm able to increase the reach of their services and products in
various countries easily. The chosen company is Zylla Limited for analysing the impact of
financial decisions effectively (Allam and Chan-Olmsted, 2021). The company was established
in 1985. This report will cover short term and long term sources of finance to fund the
acquisition of the ferry and for the company's working capital needs. It also covers an evaluation
of various investment appraisal techniques and recommending the viability of the acquisitions
and operation of the new fairy based on one suitable investment appraisal technique using the
data above.
TASK
Short term and long term sources of finance to fund the acquisition of the ferry and for the
company's working capital needs
Short term sources of finance -
It defined as those sources of finance which is used by Zylla company for borrowing the
money from others. During the time of borrowing money from other institution the agreement is
prepared by the lender. In this agreement various terms and conditions are specified by financier.
According to this terms and conditions it is mandatory for company that they must return back
the borrowed money to lender in particular time period. In context to Zylla they must use shot
term source of finance for increasing their portfolio or revenue within short period. Therefore, in
this facility company borrow money from lender for short duration. The various short term
sources of finance are trade credit, commercial bank loans, commercial papers, secured
loans etc.
In aspect of trade credit, an organization customarily purchase its supplies and materials
on credit from various organizations, and then save the debt as a payable account and it is the
biggest single category of short term credit. In aspect of commercial bank loan, Commercial
bank lending are displayed on balance sheet in the form of notes payable and is second in

importance to trade credit as a source of short-term financing. In aspect of secured loan, it
required the borrower to pledge an asset or security to avail the loan.
Long term sources of finance -
It is just the opposite of short term finance and in this method company borrowed the
money from lender or various sources for long duration (Ermasova, 2021). Due to borrow money
for long durations from lenders, company has the time for increase the profit at maximum level.
The other advantage during the time of borrowing money from long term sources is that here
time is flexible for Zylla and due to this their productivity are effectively sustained for long
duration. The various sources for long term finance are equity and preference shares, retained
earnings, debentures or bonds, venture capital, lease financing etc.
`In aspect of debenture it is a kind of certificate which is issued from lender to
organization and under this seal is a type of acknowledgement of debt. In aspect of equity shares
money are issued to the company on the basis of current value and condition of the organization.
In aspect of venture capital, it is used by organization for their effective expansion and growth.
Due to expanding their activities in various locations the reach of their services and products are
effectively increased.
An evaluation of various investment appraisal techniques and recommending the viability of the
acquisition and operation of the new ferry based on one suitable investment appraisal
technique using the data
Investment appraisal technique is basically a method which is used by organization for
enhancing their and employee’s productivity and performance at higher rate. For increasing the
performance of their employee’s company used various investment appraisal techniques which
are described below -
 Accounting rate of return – It is defined as an accounting method which is utilized by
Zylla for measuring their expected profit from an investment. It shows that net
accounting profit are raised from the investment in the form of percentage of the capital
investment.
 Payback period – It is one of the common and simplest technique for Zylla and this
method shows that in how much time company generate their revenue or profit
effectively.

 Profitability index – It is also the one type simplest investment technique and in this
method present value of an anticipated future cash flow present the profitability index.
 Net present value – It is the most common type of technique which is used by the Zylla.
In NPV, the sum of discounted future outflow and cashflow related with project.
 Internal rate of return – This is defined as a discounting rate and it brings discounted
future cash flow according to the initial investment (Hamsa, 2021). In other words, it is
that type of discounting rate where company did not have any type of loss and profit in
same time.
Years Cash inflows Discounted factor Present value
0 year -150000 1 -150000
1st year 55230 0.97 53573
2nd year 70045 0.94 65842
3rd year 88375 0.92 81305
4th year 79870 0.89 71084
5th year (57555 – 45000) =
12555
0.86 10797
Total present value 282601
Net present value = Total of present inflows – Total of present outflows
= 282601 – 150000
= 132601
So, the conclusion of the desired net present value is positive in that case the
company projected investment is financially viable and this investment is
beneficial for the company.

CONCLUSION
After the analysis of above information NPV is the suitable investment appraisal
technique for sustaining the profitability and popularity of company effectively. Business study
is one of the kind of research which plays major role within organization for run their whole
activities smoothly. With help of various research organization are able to desires and wants of
the consumers effectively within low time.

REFERENCES
Books and Journals
Allam, R. and Chan-Olmsted, S., 2021. The development of video streaming industry in Egypt:
examining its market environment and business model. Journal of Media Business
Studies, 18(4), pp.285-303.
Ermasova, N., 2021. Cross-cultural issues in business ethics: A review and research
agenda. International Journal of Cross Cultural Management, 21(1), pp.95-121.
Hamsa, S., 2021. Business to Business strategies bringing technologies and Consumer
experiences together. Annu. Res. J. SCMS, 9, pp.102-109.
Nyanga, T. and Chindanya, A., 2021. From Risk Aversion to Risk Loving: Strategies to Increase
Participation of Female Entrepreneurs in Masvingo Urban, Zimbabwe. Ushus Journal of
Business Management, 20(1), pp.1-14.
Xie, J. and Zhang, T., 2021. Study on Internationalization Strategy of China's New Business
Education in the Background of Digital Economy. International Education
Studies, 14(10), pp.95-104.