Zylla Company Finance Report: Sources, Appraisal, and Recommendations

This report analyzes the financial aspects of Zylla Company, which operates ferries. It examines both short-term and long-term sources of finance, crucial for the acquisition of a ferry and managing working capital. Short-term options like trade credit, bank credit, and customer advances are discuss...Read More

Report

Table of Contents
INTRODUCTION...........................................................................................................................1
1 Short term and long term sources of finance to fund the acquisition of the ferry and for the
company’s working capital needs,...............................................................................................1
2 An evaluation of various investment appraisal techniques and recommending ......................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Business studies is described the different elements of accountancy, finance, marketing,
economic and organizational studies. Business studies is the tool that helps to better
understanding in core subject also this is the study that manage the people to maintain and
increase the productivity (Stahl and Tung,2015). For better understanding the business studies,
Taken the Zylla Company it describes that company operates a number of ferries that provide
river crossing services for people, vehicles and goods across a river. The project report will
explain the short and long term sources of finance. Furthermore, report will explain the various
investment appraisal techniques.
1 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
Short terms sources of finance is helps to the zylla limited for acquisition of the ferry and
fulfill the needs of working capital. Short term finance provides and fulfill the daily working
needs. Its helps to company that they fulfill their needs as the requirements of working capital.
Short term financing accomplish the requirement of money for the short period like less than one
year. It is helps to meet the short term working capital requirements of the Zylla limited
(Pudelko, Tenzer and Harzing, 2015). So company use the short term sources to maintain the
profitability of the business they purchase the raw material, machinery for run the business so
these all are the short term needs of the firm. There are different types of short term sources of
finance.
Trade credit
Trade credits is help to company for purchase the raw material also provide credit grants
to company or manufacturer by supplier of the raw materials and goods, for example Zylla
limited purchase the raw material for making the best ferries on 25 to 60 days credit that means
company accomplish their needs of the short term period. This means raw materials are delivered
to the firm but payments are not pay while the expiry time of credit.
Bank credit
Bank credit is also fulfilled the short terms needs of the zylla limited which means
commercial bank provides short term finance to the firm, When bank approve the credit zylla

limited withdraw the Money on installment or at one time when they needed. In addition,
company may fulfill their working capital requirement by using the bank credits they collect the
money for buy the new ferries.
Customer advance
Customer advance is also the best option to accomplish the needs of working capital. For
example, occasionally zylla limited intonation to their customer for make the advance payment.
So customer are agreed for this condition to fulfill their needs. So this also the best way to fulfill
the working capital requirement of the company.
Long term sources of finance
Long tern sources of finance helps to company for fulfill the long term needs of the firm
such as acquisition of the other business part of the company (Kalecki, 2016). Further, long term
finance helps to invest in the fixed assets, land, plant, building to expand the growth of the zylla
limited. There are different types of long term sources.
Shares
Shares is the best way to increase the capital of the company. zylla limited sale their
share in the market to increase the capital and who can purchase the share who is also the owner
of the company. So company can raise the money to sale their share in the market for expand
their business.
Long term loans
zylla limited also take the loan from the financial institution on the basis of collateral
security to buy and acquire the ferries.
2 An evaluation of various investment appraisal techniques and recommending
Investment appraisal techniques
Payback period
Payback periods is provides the time, its define that how much time company take to
generate the cash inflow in the project of ferries that provide river crossing services for people.
Even also this technique provides the break even point to complete the project.
Formula: Payback Period = Initial Investment Cost / Annual inflow
Accounting rate of return

Accounting rate of return is described the average annual profit and average capital
investment of the company rather than describe the cash flows. This technique generates the
expected profit of the project which describe the relationship between the investment needs in
the project.
Formula: ARR = Average Profit / Average Investment * 100
Net present value
Net present value is described the overall cash flow requirements which would is arisen
in the time of projects also used the discount rate to find the net present value of the project
(Stahl and Tung, 2015). In this technique describe that a positive NPV is creates the high return
and the negative NPV creates the low return. For example the above statement is described the
positive value that means company generate the high return.
Internal rate of return
Internal rate of return is the similar as net present value but in this technique the cash
flow are discounted on two times. So this is also good method.
a = Lower discount rate
b = Higher discount rate
NPVa = NPV at lower discount
NPVb = NPV at higher discount
Calculations:
Year Cash Inflow PV @ 3% Discouted Cash Flow
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
Net Present Value 208758.415
Internal Rate of Return 34.14%
Payback Period 1.49
Accounting Rate of 44.22%

Return
Calculation of Net Profit:
Year Cash Inflow Depreciation Net Profit
1 53628.33 20000 33628.33
2 66052.435 20000 46052.44
3 80863.125 20000 60863.13
4 70924.56 20000 50924.56
5 49669.965 20000 29669.97
Total Profit 221138.42
Working notes
NPV = Cash Inflow-Initial Investment
= £358758.415 -£1,50,000
= £208758.415
Payback Period = Cost of Project / Annual inflow
= £1,05,000 / £70,215
= 1.49 years
Cost of Project = Initial Investment-Scrap Value
= £1,50,000-£45,000
= £1,05,000
Annual Inflow =(£55,230 + £70,045 + £88,375 + £79,870 + £57,555) / 5
= 3,51,075 / 5
= £70,215
ARR = Average Profit / Average Investment * 100
= 2,21,138.42 / 97,500 ×100
= 44,228 × 100
= 44.228%

Average Profit = Total Net Profit / Number of Year
= 2,21,138.42 / 5
Average Investment = (Initial Investment + Scrap value) / 2
= (1,50,000 + 45,000) / 2
= 97,500
zylla limited can follow the payback and net present value techniques in their business.
So they can use the payback period to identify the overall cash inflow in the project of ferries
which provide crossing services to the customer (Alvarez, 2016). So this technique helps to
identify the need of cash in the particular project. For example the cost of ferry is 1.000 and
company generate the high return in last 5 year.
zylla limited also can follow the net present value method in their business to identify the
cash flow requirements which increase in the time of project. Also, zylla limited identify the
positive and negative return of project by the use of Net present value. The above statement is
described that company generate the higher return in 5 years that means company generate
higher profitability to establish the project of ferry.
CONCLUSION
The conclusion is being drawn from the above project report is describes the business
studies that provide the basic knowledge of the subject. The report has been concluded about the
Short term and long term sources of finance to fund the acquisition of the ferry project. Further
report has been described the various investment appraisal techniques and recommending.

REFERENCES
Books and Journals
Alvarez, J.L. ed. 2016. The diffusion and consumption of business knowledge. Springer.
Kalecki, M. 2016. Studies in the theory of business cycles: 1933-1939. Routledge.
Pudelko, M., Tenzer, H. and Harzing, A.W. 2015. Cross-cultural management and language
studies within international business research: past and present paradigms and suggestions for
future research.
Stahl, G.K. and Tung, R.L. 2015. Towards a more balanced treatment of culture in international
business studies: The need for positive cross-cultural scholarship. Journal of International
Business Studies. 46(4). pp.391-414.
Storey, D.J. 2016. Understanding the small business sector. Routledge.
van Hoorn, A. and Maseland, R. 2016. How institutions matter for international business:
Institutional distance effects vs institutional profile effects. Journal of International Business
Studies. 47(3). pp.374-381.
Online
Appraisal techniques 2016.[Online]. Available through : <https://www.icas.com/education-and-
qualifications/back-to-basics-investment-appraisal-techniques-student-blog>.