Zylla Ltd: Individual Report on Funding and Investment Strategies

This report provides a comprehensive financial analysis of Zylla Ltd, a company involved in ferry services. It examines both short-term and long-term funding sources available for acquiring new ferries and meeting working capital requirements, including bank loans, commercial paper, retained earnings, and loans from financial institutions. The report delves into various investment appraisal techniques, such as payback period, accounting rate of return, net present value (NPV), and internal rate of return (IRR), with detailed calculations to assess the viability of the proposed ferry acquisition project. The NPV calculation shows a positive value, indicating that the investment is financially beneficial. The report concludes that financial resources are crucial for smooth business operations and highlights the importance of selecting appropriate funding and investment strategies for business expansion.

Business Scenario for
Individual Report

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Short and long term sources of funds for the acquisition of ferries and meet capital working
requirements of the company......................................................................................................1
Analysis of types of investment appraisal techniques and recommending the viability of the
acquisition and operation of the proposed project......................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Business organisations need resources of different types to carry their operations
smoothly. Financial resources is one of the most necessary things which is attributed to different
units according their needs of the funds (Buchanan, 2014). This report is based on Zylla Limited
which is engaged in the business of ferries providing the river crossing services for the people,
vehicles and goods across a river. Currently, the company has proposed an expansion plan in
which it is going to buy new ferries. Furthermore, this report includes investment appraisal
technique related ot the investment made by it for the purpose of capital budgeting.
MAIN BODY
Short and long term sources of funds for the acquisition of ferries and meet capital working
requirements of the company
The business is always in need of finance for running the operations. Different sources of
finance are available which can be used for raising the funds. This is entirely the decision of the
business organisation which source it wants to raise the capital from. Therefore, various kinds of
sources through which Zylla can obtain funds are elaborated below:
Short term sources- The funds in this category are basically raised for a shorter period
which is less than a year. Some of the sub-categories of short term sources are as follows:
Bank Credit- A business organisation can get loan from bank which is considered to be a
prompt way of getting funds. There are various forms in which a bank can give credit, the same
are as mentioned below:
(a). Loan- It is an amount which is lent to a person or business with a clause to repay the
amount at a future date. For this purpose, assets are taken as the security. It is beneficial because
loan can be raised at a lower rate and it is easily available. Zylla can use this source for meeting
the working capital requirement (Ehrhardt and Brigham, 2016).
(b). Overdraft- This service is about letting the customers withdraw the money from the
bank account beyond the amount so deposited with the bank. This form of funds is appropriate
for entities such as Zylla for fulfilling the needs of routine activities.
Commercial paper- This source of short term fund is given by banks as well as financial
institutions to the companies. The amount is given on the basis of credit score and
creditworthiness of the entity in the market. This is a short term debt which is unsecured. In the
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context of Zylla, the management can raised funds through their commercial paper for the
payment of day-to-day expenses.
Long term sources- This types of amounts are gathered for long term purposes i.e. over
one year. Mainly, such sources are accessed for the purpose of meeting the huge expenses. Some
of the long term sources of funds have been presented below which can be used by Zylla. The
same are provided underneath:
Retained earnings- This is the most preferred way which allows the company to save the
earnings after the payment of all the expenses, taxes and distribution to the shareholders. With
reference to Zylla Ltd., it can purchase new ferries with the use of retained earnings provided the
profits should not be distributed among the shareholders (Genest, Gendron and Bourdeau-Brien,
2013).
Loan from financial institutions- There are financial institutions which provide loan in the
form of financial assistance to the entities. This is given by going through the financial data of
the past years to track the financial performance of the concerned company. In the context of
Zylla, it can get finance from the financial institutions for fulfilling the proposal.
Analysis of types of investment appraisal techniques and recommending the viability of the
acquisition and operation of the proposed project
There are number of techniques available for different investment proposals which can be
applied to assess the viability of the investment. The techniques for the same have been
explained below together with their formulas:
Payback period- This period refers to the time taken by a company to recover all the
costs incurred ion the investment. This reflects the duration which is taken for reaching a
breakeven point (Maxfield, 2019). The formula for the same is given below:
 If the cash flow is equal-
Payback period = Initial investment / cash flow
 Where the cash flow is not equal-
Payback period = Years prior to recovery + non-recovered costs in the beginning of the year +
cash flow during the year
Accounting rate of return- This technique helps a company to determine the rate at
which the profit can be earned through the investment is calculated. Its formula is:
ARR = [Average annual profit after depreciation / Investment] x 100
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Net present value method- This method is used to ascertain the present value of a
project in which the company is likely to make investment. It is beneficial because the amount of
initial investment can be increased or decreased. The formula for NPV is as follow:
NPV = Discounted cash flow – Initial investment
Internal rate of return- This method is for calculating the internal rate of return which
assist the organisation in examining the efficiency of project.
Formula for the same is:
IRR = [Cash flow] - Initial investment
(1+r)
Where:
Cash flows = cash flows in the current time period
r = Discount rate
i= Time period
Calculation of viability of ferry-
Initial investment = 150000
Year Cash flow
PV factor @
10 %
Discounted
cash flow
1 55230 0.909 50204.07
2 70045 0.826 57857.17
3 88375 0.751 66369.625
4 79870 0.689 55030.43
5 57555 0.621 35741.655
265202.95
NPV = 265203-150000
= 115203
Analysis- On the basis of above computed net present value, it can be find out that acquisition of
new ferry can be beneficial for above company. This is so because their project’s present value is
in positive.
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CONCLUSION
From the above report, it has been concluded that financial resource is vital for carrying
the business activities without any hurdles. This report comprise of various sources through
which funds can be raised on the basis of their advantages and disadvantages.
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REFERENCES
Books & Journals:
Buchanan, J. M., 2014. Public finance in democratic process: Fiscal institutions and individual
choice. UNC Press Books.
Ehrhardt, M .C. and Brigham, E .F., 2016. Corporate finance: A focused approach. Cengage
learning.
Genest, C., Gendron, M. and Bourdeau-Brien, M., 2013. The advent of copulas in finance.
In Copulae and Multivariate Probability Distributions in Finance (pp. 13-22).
Routledge.
Maxfield, S., 2019. Governing capital: International finance and Mexican politics. Cornell
University Press.
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