Financial Management in Public Nonprofit Agencies MyAssignmenthelp

Question: Discuss about the Financial Management in Public and Nonprofit Agencies. Answer: Introduction: It can be said that at the time when net present value (NPV) of a particular project is positive, then the project can essentially be accepted (Brigham and Ehrhardt 2013). Again, if the NPV of a project is negative, then that project can be rejected. If the project one is taken into consideration, the net present value as present below in the table is negative. Therefore, according to the acceptance criteria, this current project can be taken into consideration. Again, the evaluation as reflected in the second table, it can be hereby mentioned that conveyer belt has negative NPV. Thus, from the viewpoint of NPV mechanism, both the projects needs to be rejected. Nevertheless, there are several other factors that can be taken into account while taking into account decisions of investment. Analysis reveals that NPV of essentially the first project mentioned in the device part is observed to be positive and the specific amount is at $989935. Thus, according to the criteria for acceptance, the first project needs to be rejected. Again, as per the table, it can be hereby mentioned that NPV of the second project that is about the conveyer system is essentially negative. Findings of the study reveals that the NPV for the second project is at $(120728). Thus, the project on the conveyer system needs to be rejected (Bodie 2013). Thus, the first project can be accepted and the other one that is the second one can be rejected. The above table shows the calculation of the NPV for three different systems that is System A, System B and System C. System A yield positive NPV of $27,810, system B has negative of ($8055) and System C has negative NPV of ($120728). Essentially, present value of the cash inflow in the future period minus the investment cost otherwise the cost of carrying out the project replicates the net present value (NPV) of the project. In case if this difference is calculated to be positive, then the project is said to be feasible. Therefore, in this case, System can be said to be feasible, whereas System B and C having negative NPV can be said to be non-feasible. System B however has better feasibility than the system C. Therefore, in this case System A can be considered for investment. Analysis of average risk that is involved in capital budgeting In this section, the learner has carefully chosen the company JB Hi Fi, an ASX listed corporation that is undertaking a novel project of establishing 6 new stores during the year 2015. In a bid to assess the overall risk of capital budgeting, entire duration of the specific project is considered to be 15 years (Jbhifi.com.au 2017). By employing capital budgeting technique, we are here to evaluate the feasibility of the project. In this case, we intend to utilize the net present value technique for deciding whether to undertake a certain project and analysis of risks that is associated to the project. In essence, present value of the cash inflow in the future period minus the investment cost or else the cost of carrying out the project reflects the net present value of the project. In case, if the variance is positive, then the project is said to be feasible (Bodie 2013). However, there are also certain other facets that need to be take into account that affects specifically the NPV o f the project. However, this project necessarily involves risk owing to different variables that can be associated to the net present value. Again, the capital cost is the factor that we can take into account for particularly discounting the cash inflows in the future period (Bartlett et al. 2014). Essentially, the capital cost needs to be more, in itself, rate for discounting when a particular project is considered to be risky (McKinney 2015). In addition to this, the cash flow of the corporation during the future essentially depends on financial leverage of the business concern. In case if the business concern has greater debt requirements, then the financial leverage is expected to be considerably high and the cash flow during the future is expected to be more risky (Jbhifi.com.au 2017). However, these can be regarded as the variables that can exert influence on NPV and can thereby depict the overall riskiness of specific projects. The primary objective of management of working capital is to make certain that a business concern is able to carry on its functions and has adequate capability to satiate both maturing debt that are short-term in nature as well as future operational expenditures. From the reports of the company, the working capital of the corporation JB Hi Fi for two different financial year has been amassed. The figures for the working capital are hereby presented below: It can be hereby observed that the working capital of the corporation is negative. This Negative working capital occurs at the time when a particular firms current liabilities is over and above the possessed current assets. This also indicates towards the fact that the business concern has failed to meet its different obligations during the short term period by employing the current assets. There might be different situations that leads to the negative working capital of the capital. However, in order to state whether this negative working capital is a favourable situation or an unfavourable situation depends on the reason behind the negative result. Essentially, the figure for working capital has declined by 117.4. In addition to this, the inventory turnover ratio is also around 6.1 times during the financial year 2015 as compared to 6.2 times during the year 2014 (Jbhifi.com.au 2017). However, analysis the findings reveal that the company has failed to efficiently convert its inven tories into sales in order to fulfil different short term requirements even though the company has become a nit more effectual during the financial year 2015. However, this negative working capital also implies that the firm utilizes the liabilities of the short term. As rightly indicated by Brigham and Ehrhardt (2013) financing refers to the means of acquiring diverse resources in order to purchase any specific item, then repaying the loan in a definite period of time say weekly, monthly or else annually. In essence, short term financing refers to the process of arranging of funds in a bid to meet up the requirements of a specific corporation for about a year or else for a lesser time. The firm might need short term financing in case flows of cash from different operations are not adequate to maintain the growth associated financing requirements. Again, the firm might possibly prefer to borrow funds in the current period for the inventory or any other asset of the short term period. As rightly indicated by Brigham and Ehrhardt (2013) credit risk indicates towards a risk that a specific borrower might not pay back loans and that the lender might fail to get back the loan or else the interest related to the same. This credit risk mainly stems as borrowers anticipate to utilize flows of cash to make payments for the current debts. However, it is impossible to make it certain that borrowers can definitely pay back the borrowed funds. Utilization of liquid financial assets can help in lowering the overall credit risk of the corporation. In essence, the business concern Telstra Corporation is depending heavily on the particular use of different commercial paper (Telstra.com.au 2017). This is apparent that utilization of commercial paper can lead to improvement of the overall credit worthiness as well as greater credit rating of the corporation. As rightly indicated by McKinney (2015) financing policy can be considered to be integral to the strategic plan of a corporation. This financing policy sets out the manner in which a particular corporation plans to fund diverse operations in order to meet organizational objectives both in the current period and in the upcoming period. The financing policy deals with the management of debt and equity, trade-offs between the ultimate selections of optimal structure of capital, role of essentially structure of capital in necessarily competitive strategy, design of structure of capital as well as securities. A capital structure that is oriented to debt is essentially followed by the business concern Telstra Corporation. Therefore, this capital structure of corporation can help in reduction of the overall risk. Again, business concerns have assimilated three objectives in particularly the financing policies. In essence, this objectives involve preservation of financial agility, maximizati on of wealth of the shareholders of the firm by generation of higher return and adoption of balanced approach by financial strengthening (Telstra.com.au 2017). In particular, the capital structure of the business concern has considerably contributed by means of usage of commercial paper as reflected by the overall debt level in the entire capital (Telstra.com.au 2017). Essentially, there is higher growth of capital spending by adoption of financial policy and this in turn has affected the overall profitability, efficacy of management as well as financial health. References Bartlett, G., Beech, G., de Hart, F., de Jager, P., de Lange, J., Erasmus, P., Hefer, J., Madiba, T., Middelberg, S., Plant, G. and Streng, J., 2014. Financial Management: Turning theory into practice. OUP Catalogue. Bodie, Z., 2013. Investments. McGraw-Hill. Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory practice. Cengage Learning. Jbhifi.com.au. 2017. JB Hi-Fi | Australias Largest Home Entertainment Retailer. [online] Available at: https://www.jbhifi.com.au [Accessed 6 May 2017]. McKinney, J.B., 2015. Effective financial management in public and nonprofit agencies. ABC-CLIO. Telstra.com.au. 2017.Telstra - mobile phones, prepaid phones, broadband, internet, home phones, business phones. [online] Available at: https://www.telstra.com.au/ [Accessed 30 Apr. 2017].