Executive summary The main purpose of this report is to relay its two parts. Part one contains financial performance analysis of Aviva Life Insurance Company for the financial years 2006 and 2007. The analysis was conducted using financial ratios. The following are the applied ratios in the analysis: current ratio, quick ratio, interest cover ratio, capital gearing ratio, gross profit margin, return on capital employed, asset turnover, dividend yield, dividend cover and earnings per share. The second part of the report contains a detailed discussion on determinants of sources of finance that include cost, risk, flexibility and control. A large company like Aviva Life Insurance has various reasons for obtaining funds; some of the reasons are discussed in this part. The report has given a discussion of both internal and external sources of funds. Some of the internal sources are ordinary and preference share. The external sources discussed are debt finance, Bills of exchange, Lease finance and debenture finance. Lastly, is the proposal of which source of finance is suitable for the company, with a complete rationale. Introduction This report’s main objective is to relay to you analysis of Aviva Life Insurance Company. The company is a public limited type that has its shares traded in the stock market (it is listed). The analysis is done in two parts and the first part consists of a two-year (2006 and 2007) financial performance of the company from investors’ point of view. The following ratios have been used in the analysis: dividend yield, dividend cover, earnings per share, current ratios, quick ratio, gross profit margin, operating profit margin, return on capital employed and capital gearing. This part of the report also includes non-financial information of the company under consideration. Part two of the report consists of a comprehensive analysis of different sources of capital and a proposal of the best source to select considering variables involved. Company’s profile (non-financial information) The company is based in the U.K. It was created after a merger between Commercial Union and General Accident, which took place in the year 2000. In the same year, the company’s name was CGNU but, later on in July 2002, through shareholders’ decision, its name was changed to Aviva Plc. In its move to expand, the company executed a strategy that involved £1.1 billion acquisition plan; the company acquired was RAC plc. Aviva Life Insurance Company through its foreign market entry strategy acquired AmerUS Group, a Company based in the U.S. Aviva Life Insurance Company is dealing with insurance products such as life insurance scheme, Pension schemes, investment management, funds management and General insurance. It has a global market coverage which it attained by establishing its subsidiaries. Some of the countries in which it has its subsidiaries are Poland, U.S.A., China and Canada (Eckett 2005, p. 215). Financial analysis Financial analysis is a process-conducted by financial managers of identifying the financial performances of a company by comparing the items in profit and loss account and those in balance sheet. This is so because the items in th