Finance Management Analysis Reports

Running head: FINANCE MANAGEMENT
Finance Management
Name of the Student
Name of the University
Author’s Note

FINANCE MANAGEMENT1
Table of Contents
Executive summary....................................................................................................................2
Part 1: Industry Review..............................................................................................................3
Part 2: Business Performance Analysis......................................................................................3
2.1 Statement of Profit or Loss..............................................................................................3
2.2 Statement of Financial Position.......................................................................................6
2.3 Statement of Cash Flows..................................................................................................8
Part 3: Investment Appraisal and Sources of Finance.............................................................10
3.1 Investment Appraisal.....................................................................................................10
Management Forecast......................................................................................................10
Investment appraisal Techniques.....................................................................................10
Payback Period.................................................................................................................10
Accounting Rate of Return...............................................................................................11
Net Present Value.............................................................................................................11
3.2 Sources of Finance.........................................................................................................12
References................................................................................................................................14

FINANCE MANAGEMENT2
Executive summary
The report shows that the traditional coffee houses are facing major challenges from the
independent coffee houses because of their innovation. As per the analysis of profit or loss
statement, Roast Ltd has good profitability position with the increase in net profit ratio and
operating profit ratio in 2018. However, as per the analysis of statement of financial position,
the liquidity position of Roast Ltd is not good as 2017 and there is increase in debt in the
capital structure. Large amount of inventory is stored in stock which affects the inventory
turnover ratio. In addition, Roast Ltd has failed in collecting the receivable quickly as
compared to the previous year. There is increase in the operating cash cycle of Roast Ltd
which is not a favorable condition. However, the management of Roast Ltd is undertaken a
two phase expansion strategy and the completion of this expansion project will make the
company more profitable; and it can be expected that the current financial issues will be
resolved after the expansion. Therefore, after considering all these aspects, it is recommended
to Starbucks UK to process with the acquisition of Roast Ltd. The inclusion of additional
capital by Starbucks UK after the acquisition would improve the financial performance as
well as position of Roast Ltd.

FINANCE MANAGEMENT3
Part 1: Industry Review
 Coffee house industry in United Kingdom (UK) is a portion of the quick service
restaurant market in the country and an increasing trend is there in the number of
coffee houses in UK that includes both independent operators and non-specialists
(ibisworld.com 2019).
 The coffee house industry of UK is controlled by three leading coffeehouse chains;
they are Starbucks, Costa Coffee and Caffe Nero.
 Costa Coffee is the key multinational British coffee house chain and it is ranked as the
biggest coffee house chain in Europe. There has been major increase in the number of
coffee houses that is 2,422 shops in 2018.
 Starbucks is another major coffee house chain having largest presence in UK. There
has been increase in the profitability of Starbucks along.
 In terms of favorite coffee house, Caffe Nero has better reputation as compared to
Cosa Coffee and Starbucks (statista.com 2019).
 There are certain opportunities and challenges in the UK coffee house industry.
Traditional coffee houses are facing major challenges from non-specialists coffee
houses. Coffee houses are required to depend on the tailored and experience-led
offerings as these are the key of success. Supply chain transparency will challenge the
traditional coffee house brands like Starbucks. Innovation with premium products will
provide key opportunities to the coffee house in UK.
Part 2: Business Performance Analysis
2.1 Statement of Profit or Loss
It can be seen from the Profit or Loss statement of Roast Ltd that there has been
improvements in the financial performance in 2018 as compared to 2017 in the presence of