Important: Our WhatsApp number is changing from +61 2 7908 3995 to +44 20 3608 8443 due to technical reasons

Financial Scenario Assignment Sample

  • Plagiarism & Error Free Assignments By Subject Experts
  • Affordable prices and discounts for students
  • On-time delivery before the expected deadline

No AI Generated Content

62000+ Projects Delivered

500+ Experts

Enjoy Upto 35% off
- +
1 Page
35% Off
AU$ 11.83
Estimated Cost
AU$ 7.69
Securing Higher Grades Costing Your Pocket? Book Your Assignment At The Lowest Price Now!
X

1: Introduction - Financial Scenario

Get Free Samples Written by our Top-Notch Subject Expert Writers known for providing the Best Assignment Help Services in Australia

In this report, a detailed discussion on the financial scenarios for a specific organisation shall be discussed in detail. In order to incorporate essential details about this report, the company Cochlear Ltd. shall be considered. The additional attributes of this report shall further discuss the importance of working capital management as well as provide ample substance regarding the need for relaxing credit terms for customers. More discussion on this report shall be further provided for discussing the key takeaways of a project evaluation for the company. In this regard, both NPV and payback periods shall be considered for numerical calculations and analysis. Furthermore, justification shall be further provided for selection of a project based on financial readings.

The report for the Capstone project shall further dig deep into the relevance of break even analysis. In this point, the significance of breakeven, importance of cash and accounting break even shall be discussed. Moreover, criteria assessment for both projects shall also be discussed in this report. Importance of funding choices and application of a funding choice shall also be considered as an integral part of this report., while recommendations and limitations shall be proposed to the board based on findings and analysis.

2: Working Capital Management

2.1: Overview and importance of working capital management

Working capital management is deemed to be an essential aspect of the financial structure of an organisation to incorporate suitable monetary and fiscal decision-making policies. As per narrations and explanations of Anton & Alfoarei Nucu (2020), working capital management can be ascertained with respect to strategic utilisation of available organisational resources for facilitating daily conduct of business activities. Hence, the role of utilising current assets and current liabilities is deemed to be an important factor by an organisation to incorporate healthy daily sustainability prospects. The fundamental importance associated with the consideration of working capital management can be determined with respect to enabling the maximisation of revenues and helping an organisation meet its requisite financial goals and objectives. This mainly can be exemplified on the basis of propelling accurate productivity and efficiency prospects for a company by managing its inventories, receivables, payables and other short-term assets and liabilities. Mathematical formulation of working capital management can be derived as the difference between current assets and current liabilities. Following is the detailed discussion and synopsis regarding relaxation in credit terms for customers.

2.2: Discussion regarding relaxation in credit terms for customers

The provision of offering relaxation in the credit terms for customers is deemed to be a vital organisational aspect for Cochlear Ltd. to enable harmonised relations with customers. Thus, by increasing the credit payment terms from 30 to 45 days, the company can boost its future projected sales, thereby leading to a higher generation of sales revenues. As per explanations and illustrations of Obae & Jagongo (2022), an increase in the credit terms by a company also enables higher receivables balances, where a company allows freedom to customers for paying their requisite dues. However, the implications of relaxation in the credit terms also prevail in a large manner, which could essentially slow down the financial and revenue generation process for Cochlear Ltd. The primary implication could be associated with inefficiency in ensuring smooth and hassle-free collection of payments from customers (Alhassan & Islam, 2021).

Hence, Cochlear Ltd. could potentially welcome mismanagement in the credit and working capital management leading to a shortage of cash balances and financial resources. Moreover, the implications associated with Cochlear Ltd. could be considered with respect to inviting higher chances of financial risks. The potential of higher financial risks can be considered as a situation where a customer or a certain set of customers do not pay off dues even after repeated reminders. Hence, this could effectively become an alarming situation for Cochlear Ltd. leading to financial losses and thinning of business competitive advantages.

3: Project Evaluation

3.1: Usefulness of Payback

The payback period is often considered to be an essential investment appraisal and capital budgeting method, where a company can determine the payback period of a project. As per the explanations and views of Abuk & Rumbino (2020), the payback period usually helps determine the time needed for a company to recover its initial investment costs. Generally, lower payback periods are being encouraged to select acceptance or rejection of a project with respect to predetermined expected cash inflows and cash outflows. Therefore, a quick capital budgeting and investment appraisal overview could be facilitated by the company to determine feasibility prospects with respect to implementation of a new project.

3.2: Usefulness of NPV

In addition to the Payback period, the NPV method is also considered to be a reliable method for computing investment appraisal prospects. As per explanations and illustrations of Zulkarnain, Munthe & Fatahurrazak (2020), the Net Present Value or the NPV method is useful as it helps determine the actual present value of a project by considering time value of money. Hence, the NPV is generally considered to be the top-most indicator for an organisation to decide whether or not to proceed with the implementation of a particular project. Hence, owing to discounting features this method is more plausible and credible for ensuring detailed project aesthetics are in order for Cochlear Ltd.

3.3: Calculation of Payback and NPV for Project A

Capstone Project A

Years

Cash Flows

Discounting Factor @ 8%

Discounted Cash Flows

Cumulative Cash Flows

Payback (Years)

0

 $ -10,00,000.00

1.00

 $ -10,00,000.00

 $ -10,00,000.00

1

 $ 6,34,000.00

0.93

 $ 5,87,037.04

 $ -4,12,962.96

2

 $ 6,34,000.00

0.86

 $ 5,43,552.81

 $ 1,30,589.85

2.24

3

 $ 6,34,000.00

0.79

 $ 5,03,289.64

 $ 6,33,879.49

4

 $ 6,34,000.00

0.74

 $ 4,66,008.93

 $ 10,99,888.42

5

 $ 6,34,000.00

0.68

 $ 4,31,489.75

 $ 15,31,378.16

Net Present Value (NPV)

 $ 15,31,378.16

Table 1: Calculation of Payback and NPV for Project A

(Source: Created by Learner)

3.4: Calculation of Payback and NPV for Project B

Capstone Project B

Years

Cash Flows

Discounting Factor @ 8%

Discounted Cash Flows

Cumulative Cash Flows

Payback (Years)

0

 $ -15,00,000.00

1.00

 $ -15,00,000.00

 $ -15,00,000.00

1

 $ 9,58,000.00

0.93

 $ 8,87,037.04

 $ -6,12,962.96

2

 $ 9,58,000.00

0.86

 $ 8,21,330.59

 $ 2,08,367.63

2.25

3

 $ 9,58,000.00

0.79

 $ 7,60,491.29

 $ 9,68,858.91

4

 $ 9,58,000.00

0.74

 $ 7,04,158.60

 $ 16,73,017.51

5

 $ 9,58,000.00

0.68

 $ 6,51,998.70

 $ 23,25,016.22

Net Present Value (NPV)

 $ 23,25,016.22

Table 2: Calculation of Payback and NPV for Project A

(Source: Created by Learner)

3.5: Factors considered for selection of the project

In order to select a particular project, the concerned management of Cochlear Ltd. the major factors considered for selecting the project involves the NPV and the payback analysis of the projects. From table 1 of payback and NPV calculations, Project A is expected to recover its initial costs of investment within 2.24 years, while fetching an NPV of $15,31,378.16. Similarly, Project B is expected to recover and meet its initial costs within 2.25 years, by fetching an expected net present value of $23,25,016.22. Thus, Project B is needed to be selected by the management of Cochlear Ltd. owing to higher NPV, and nearly the same Payback as compared to Project A.

4: Break-Even Analysis

4.1: Significance of Break-Even Analysis

The break-even analysis is often deemed to be an important and significant factor to determine the plausibility of daily operational conduct within an organisational boundary. As idealised and expressed by Kravchyk, Okur & Kovalenko (2021), the break-even analysis is generally regarded as a financial situation where fixed costs meet the contribution margin, thereby determining the actual units needed to be produced for meeting the costs of operations. In order to evaluate and determine the accounting significance of break-even analysis, the marginal costing approach is generally used by organisations. Hence, the significance of conducting a break-even analysis can be considered with respect to identifying the suitable cost structure of a company, which can be further substantiated based on an assessment of the usefulness of cash and accounting break even as management tools. Following is a detailed discussion on the cost and accounting break even applicable for Cochlear Ltd.

4.2: Usefulness of Cash and Accounting Break Even as management tools

The usefulness of cash and accounting break even as core management tools can be associated with examining the viability prospects for an organisation. Hafizan et al. (2020), illustrated and idealised that by adhering to cash and break even accounting an organisation can find out how much quantities are needed to be manufactured and sold to achieve favourable business propositions. Hence, the cash and accounting break-even is also deemed to be useful from an investor's point of view as break even with lower units generally attracts higher investor orientation and potential. Thus, a favourable break even could pave the way for Cochlear Ltd to attract a higher plethora of investors, thereby influencing its financial capabilities in an affluent manner.

4.3: Discussion on meeting of criteria by Project A

Capstone Project A

Particulars

Units

Per Unit Cost/ Price

Total

Sales

4000

 $ 650.00

 $ 26,00,000.00

Variable Costs

4000

 $ 405.00

 $ 16,20,000.00

Contribution Margin

 $ 245.00

 $ 9,80,000.00

Cash Fixed Costs

 $ 1,60,000.00

Profits

 $ 8,20,000.00

Break Even Point

Fixed Costs

 $ 1,60,000.00

Contribution Margin per Unit

 $ 245.00

Break Even Point (Units)

653

Table 3: Calculation of Breakeven Point for Project A

(Source: Created by Learner)

As per the above table of break-even point calculations, it can be ascertained that in order to achieve a no-profit no-loss zone in Project A, 653 units are needed to be manufactured and sold by the company. Hence, the cash and accounting breakeven criteria are met as a proportion of fixed costs with contribution margin have been applied for determining the breakeven point in units. 

4.4: Discussion on meeting of criteria by Project B

Capstone Project B

Particulars

Units

Per Unit Cost/ Price

Total

Sales

4000

 $ 650.00

 $ 26,00,000.00

Variable Costs

4000

 $ 300.00

 $ 12,00,000.00

Contribution Margin

 $ 350.00

 $ 14,00,000.00

Cash Fixed Costs

 $ 1,60,000.00

Profits

 $ 12,40,000.00

Break Even Point

Fixed Costs

 $ 1,60,000.00

Contribution Margin per Unit

 $ 350.00

Break Even Point (Units)

457

Table 4: Calculation of Breakeven Point for Project B

(Source: Created by Learner)

According to the above table demonstrated above for Project B, 457 units are needed to be produced and sold by the management of Cochlear Ltd. to arrive at a no-profit no-loss zone. Hence, it can also be justified that Project B has also met criteria of cash and accounting break even by successfully applying the formula of fixed costs divided by contribution margin per unit.

5: Funding Choice

5.1: Importance of Funding Choices for a Project

Funding choices are generally regarded as an important area of consideration for an organisation with respect to promoting harmonious business conduct prospects in the near and distant future. As per explanations and views of Fakir, Fairchild & Tkiouat (2019), the importance of funding choices is further magnified by considering the ROI and debt ratio of a company to understand what sources of funds are mostly used for facilitating daily and long-term conduct of core operational activities.

In order to further determine the appropriate and available funding choices for a project following discussion is being conducted.

5.2: Available Funding Choices for a Project

The major available funding choices for a project consist either of debt capital or equity capital. In order to raise funds from debt capital, an organisation could issue debentures, facilitate external borrowings, or could purchase bureaucratic and governmental bonds. As per narrations and explanations of Fianto et al. (2018), a higher proportion of debt funding is generally considered to be a boon for an organisation as the relative degree of business risks associated with funding through debt capital remains lower as compared to equity capital. Thus, an encouragement for taking loans and borrowings is required to be considered by the management of Cochlear ltd. to ensure zero hiccups in project implementation. However, the management of the company is also needed to consider the repayment terms, conditions and clauses for loans and borrowings to ensure nullified conflicts in regular activity streams of the business. A detailed discussion on the overview of equity capital and its usage by Cochlear Ltd. is substantiated as follows.

In addition to the adherence to considering debt capital as a plausible funding choice, the concerned management of an organisation can also seek equity capital as a viable alternative. Achieng, Muturi & Wanjare (2018), expressed and idealised that the fundamental source of raising funds through equity capital can be considered as share capital or by issuing securities. Moreover, additional sources of equity capital involving crowdfunding and venture funding could also be encouraged by an organisation for promoting favourable funding choices and options. Therefore, the concerned management of Cochlear Ltd. can potentially look to issue shares and other forms of marketable securities to the general public for welcoming higher funding prospects associated with business continuity. However, over reliance on funding through equity capital should be avoided owing to a higher degree of market risks and volatility.

6: Conclusion, Limitations and Recommendations

6.1: Conclusion

This report has discussed the essential attributes of working capital management, where implications of relaxing credit periods can lead to haphazard collections from customers. The additional emphasis on this report has been further provided with respect to the selection of Project B owing to better NPV financials as compared to Project A. Sources of Funding mainly consist of debt and equity capital, while both Project A and Project B are deemed to meet the requisite criteria of cash and accounting break even.

6.2: Limitations

The major limitations associated with the conduct of the analysis consist of the following indicators.

  • Lack of proper financial data and information to substantiate selection of an appropriate funding source.
  • Lack of employing the IRR method for computing actual project returns in percentage for both Project A and Project B.
  • Lack of adequate data and information to study the essential numerical and financial aspects of break-even analysis. Margin of safety and taxation rate could have led to determination of actual management costing approach applicable to both projects.

6.3: Recommendations

In order to excel and perform amicably with respect to expecting higher profitability from the projects, following recommendations are being proposed to the board.

  • Project B is needed to be selected owing to better financial expected returns, NPV and profitability prospects.
  • Distinction in identification of sources of equity capital is needed to be prescribed thoroughly by the management of Cochlear Ltd. to expect higher profitability and future investment prospects.

References

  • Abuk, G. M., & Rumbino, Y. (2020). Analisis Kelayakan Ekonomi Menggunakan Metode Net Present Value (NPV), Metode Internal Rate Of Return (IRR) Payback Period (PBP) Pada Unit Stone Crusher di CV. X Kab. Kupang Prov. NTT. Jurnal Teknologi14(2), 68-75. http://ejurnal.undana.ac.id/jurnal_teknologi/article/view/3254
  • Achieng, B. O., Muturi, W., & Wanjare, J. (2018). Effect of equity financing options on financial performance of non-financial firms listed at the Nairobi Securities Exchange, Kenya. Applied Economics and Finance5(4), 160-173. https://doi:10.11114/aef.v5i4.3398
  • Alhassan, I., & Islam, K. A. (2021). Credit management strategies and financial performance of industrial goods sector in nigeria. Indian Journal of Finance and Banking8(1), 59-74. https://doi.org/10.46281/ijfb.v8i1.1495
  • Anton, S. G., & Afloarei Nucu, A. E. (2020). The impact of working capital management on firm profitability: Empirical evidence from the Polish listed firms. Journal of risk and financial management14(1), 9. https://doi.org/10.3390/jrfm14010009
  • Fakir, A. E., Fairchild, R., & Tkiouat, M. (2019). A hybrid profit and loss sharing model using interest free-debt and equity financing: An application of game theory as a decision tool. The North American Journal of Economics and Finance49, 352-360. http://shura.shu.ac.uk/24600/1/Hybride%205.pdf
  • Fianto, B. A., Gan, C., Hu, B., & Roudaki, J. (2018). Equity financing and debt-based financing: Evidence from Islamic microfinance institutions in Indonesia. Pacific-Basin Finance Journal52, 163-172. https://doi.org/10.1016/j.pacfin.2017.09.010
  • Hafizan, A. M., Alwi, S. R. W., Abd Manan, Z., Klemeš, J. J., & Abd Hamid, M. K. (2020). Design of optimal heat exchanger network with fluctuation probability using break-even analysis. Energy212, 118583. https://doi.org/10.1016/j.energy.2020.118583
  • Kravchyk, K. V., Okur, F., & Kovalenko, M. V. (2021). Break-even analysis of all-solid-state batteries with Li-garnet solid electrolytes. ACS Energy Letters6(6), 2202-2207. https://doi.org/10.1021/acsenergylett.1c00672
  • Obae, G., & Jagongo, A. (2022). Credit management practices and loan performance of commercial banks in Kenya. International Academic Journal of Economics and Finance, 3 (7), 222237, 2. https://www.iajournals.org/articles/iajef_v3_i7_222_237.pdf
  • Zulkarnain, D., Munthe, I. L. S., & Fatahurrazak, F. (2020). Analisis Kelayakan Usaha (Payback Period, Net Present Value Dan Break Even Point) Penangkapan Ikan Teri Menggunakan Pukat Cincin Di Dusun Tukul Desa Pasir Panjang Kecamatan Bakung Serumpun Kabupaten Lingga. Student Online Journal (SOJ) UMRAH-Ekonomi1(1), 45-53. https://soj.umrah.ac.id/index.php/SOJFE/article/view/120
Recently Download Samples by Customers
Our Exceptional Advantages   Order Now   Live Chat
Get best price for your work

offer valid for limited time only*

© Copyright 2024 | New Assignment Help | All rights reserved