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Fund Accessing and Investment Appraisal Techniques

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  • Level: High school
  • Pages: 5 / Words 1209
  • Paper Type: Essay
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  • Downloads: 1112
Question :

Questions- This assessment will cover following questions:

  • Zylla company is engaged in offering ferry services which helps human beings and equipments to get across the river. What can be the best source of finance both for short and long term that can assist the capital needs?
  • How can the investment appraisal techniques be used for conducting the successful operation?
  • Explain by giving the recommendations of suitability of the opted strategy for investments?
Answer :
Organization Selected : Zylla Company

INTRODUCTION

Business acquisition is a process that is used by an organization in order to improve the strength and opportunities of the company by combining two similar organizations in one. The main objective of this process is related to business expansion and business strengthening processes. This report is providing a brief of fund accessing and investment appraisal technologies that can be used by Zylla Company for acquiring Ferry Finance company.

MAIN BODY

Sources of Finance For Fund Acquisition

There are different sources that can be used to acquire funds for the acquisition process of Ferry Finance. These sources of fund acquisition can be classified in two categories long-term sources and short-term sources (Ebben and Johnson, 2018). Both sources of fund acquisition can be used by Zylla Company. For each type of fund-accessing process, there are some advantages that can help the organization to ensure enough capital to acquire Ferry Finance.

Funding is an act of providing financial resources, normally in the form of money. There are different sources of funding that can be used by the organization to collect capital in order to perform some business activities.

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Short-Term Source of Finance

Short-term financing is a form of financing in which borrowing or lending of money is performed for a short period and the borrower has to pay back the debt within in short term as per the financial agreement. Normally the short-term way of funds acquisition is considered for a year or less than a year. There are different short-term fund acquisition processes that are possible for Zylla Company which are-

Trade Creditors

This are most important single source of short-term credit. Trade creditors are considered as business establishments that sells goods to other people or organizations on credit. These processes of business do not require money at the spot of business (Popli, Ladkani and Gaur, 2017). The transaction of money can be processed some days later.

Commercial Banks

The commercial banks in the nation are sources of short-term finance for the business operation of other organizations. This process of transaction is completed with security and without security. Commercial banks only consider well-established organizations for fund lending without security.

Government Institutions

there are some government and semi-government organizations that are providing funds to other organizations. These organizations are authorised to provide funds to other organizations for short-term business concerns. These sources are considered as one of the most efficient sources of short-term fund access.

Long-Term Source of Finance

the long-term sources of financing can be considered as capital requirements for a period of more than 5 years. This duration could be more and this time duration is dependent on some other factors that are associated with the process of financing. This type of funding process can be used for transactions where funds are required for a longer time. There are some processes that can be used as long-term sources are-

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Equity Share

This is one of the most common sources of finance for any business organization. This process provides the right to the investor to vote, share profit and claim on the assets of the organization. There are various types of equity shares that are authorised, issued, paid up or subscribed. Organizations sell their share of the company in order to access funding from the marketplace.

Venture Funding

Venture funding is a process in which venture funding organizations manage the funds or money of investors. These investors are people who are investing in new organizations that possess the potential for future growth (Hoffman and Bechtold, 2018). This venture provides funds to organizations or start-ups that need funds to run their business for the long term. This funding is provided to only those organizations which are capable of generating high revenue later in business.

Term Loan from Financial Institution

These types of funds are provided by banks and other financial organizations. This type of funding source is used for the business expansion goals or process. This is one of the best ways for Zylla Company to access funds for acquiring a Ferry Financing company. This type of financing is also known as project financing.

This is how various processes can be used by Zylla Company to access funds from different sources of funding.

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Investment Appraisal Techniques

There are different processes that can be used by the organization for the investment appraisal process. This process can be used by the organization to attract investors to make an investment in the company that can act as a source of funding for the organization. Some of the processes that can be used by the organization are- Internal rate of return, Net Present Value, and accounting rate of return. These are the most common processes which are used by the organization to attract more investors.

Internal Rate of Return

internal rate of return is considered as a discounting cash flow technique that gives a rate of return that is earned by the project. This is a discounting rate in which total of the initial cash outlay and discounted cash inflow are equal to zero.

Net Present Value

Net present value in finance applies to a sequence of cash flows that occur at various times. The current value of the cash flow depends on the interval between current time and cash flow. This also depends on the discount rate (Friar and Mulki, 2019). This is also considered as the value of money.

Accounting Rate of Return

This rate is also known as the average rate of return or a financial ratio that is used in financial budgeting. Calculated the return that is generated from the net income of the proposed capital investment. This is considered a percentage return.

Recommendation

These are some processes that can be used by the Zylla Company to attract investors to invest in the process of acquiring Ferry Financing. This process can help them to access enough funds to meet their business requirement (Wangerin, 2019). From these procedures, Zylla Company can use Net Present value in order to perform investment appraisal.

CONCLUSION

This report concludes the importance of various fund-accessing techniques that can be used by the Zella Company to collect funds from the marketplace for acquiring Ferry Finance company. There are different fund-accessing processes that have been analysed in the report which can be used by the company to develop capital for the acquisition process. The importance of investment appraisal techniques is also analysed in the study which can provide the capability to access more investors from the target market.

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