Financial Decision Making

Financial Decision Making

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
Part 1: Industry Review...................................................................................................................3
Part 2: Business Performance Analysis...........................................................................................4
2.1 Statement of Profit or Loss:...................................................................................................4
2.2 Statement of Financial Position:............................................................................................6
2.3 Statement of Cash Flows:......................................................................................................7
Part 3: Investment Appraisal and Sources of Finance...................................................................10
3.1 Investment Appraisal:..........................................................................................................10
3.2. Sources of Finance:.............................................................................................................12
REFERENCES..............................................................................................................................14

EXECUTIVE SUMMARY
The report summarises different aspects of a thorough analysis of financial business
performance of Roast Ltd. Net probability level of company has been reached to GBP81000 in
year-2018 which was GBP36000 in year-2017. This improvement in profitability level
demonstrates that demand for corporation's products is high that assist them to achieve growth
and development. The corporation is competent to pay-out all short-term and long-run
obligations after struggling with issues of high-costs related to coffee-beans procurement. The
corporation's cash status shows this business's status of poor cash flows but this corporation
continues to increase its growing rate because it could be concluded that the acquisition decision
of Roast Ltd can be made by Starbucks.
It is noted from the second portion of this study that Roast Ltd. will expand in the project
to open new shops in Romania so that it strengthens its cash position and raises its sales
revenues.
Part 1: Industry Review
United Kingdom's new coffee house sector is one of the fast-growing sector that continues
to increase due to the widespread social structure of UK society. The division overview is
provided by a top-line analysis, as below:
 The coffee housing sector in UK has reported 6billion pounds of overall sales, as per the
study undertaken by ibis.
 The overall number of enterprises active in the coffee house sector in the United
Kingdom area is about 16199, a rise in comparison to the previous year.
 Costa coffee, Cafe Ritazza, Starbucks, Café Nero and many others are the primary
leaders in such sector. All such strikers operate well because this sector has registered
6.1% yearly growth, sufficient to state a profitable market (Current coffee house industry
of United Kingdom. 2019).
 The above-mentioned company has numerous opportunities, which include developing a
nutritious, organic coffee that can satisfy the recent push towards good health.
In addition to the above-mentioned potential, the coffee houses sector in UK faces many
difficulties today. These are evolving trend towards healthier replacements eg green tea instead
of coffee. The competitive pressure experienced by new competitors in this sector is another

obstacle facing this sector. High profit margins which organizations associated in this sector
enjoy are the reason for this extreme competition.
Part 2: Business Performance Analysis
2.1 Statement of Profit or Loss:
Roast Ltd.'s statement of sales is reviewed to support the Starbucks Chief Financial
Officer to make valid decisions concerning Roast Ltd's acquisition. From the company's income
statement it is shown that its turnover is rising as its year-2017 gross sales have increased to
2022000 pounds and in year-2018 to 2534000pounds.
In addition to the sales, the organization also has been increased its gross profit as well as
even net profit, which indicates that it is competent of increasing business-growth and expanding
in a diverse and competitive framework. Note that the enterprise's profits but expenses have
enhanced also, as the 2017 operating-expenses amounted to 466,000 pounds and the operating
expenses/spending in 2018 reached to 477,000 pounds.
The study is further focused on the assessment of the ratio that can help determine the
organization's financial results effectively.
Gross profit margin
This ratio is a fiscal profitability metric that denotes a company's strength to make profit
from the value spent in labour and materials costs (Correia, Dussault and Pontes, 2015). A rising
gross profit shows the company's success that lets it invest money on potential operating costs.
Particulars Year-2017 Year-2018
Gross profit 517000 544000
Net sales 2022000 2534000
Formula Gross profit / Net sales *100
Result 25.57% 21.47%
Analyses carried out in above table reveal that Roast Ltd's gross profit has been reduced.
In 2018, gross-margin is 21.47-percent which declined to 25.57-percent. Such a margin reduction
does not mean that the decision to buy this organization is optimistic. The gross profit margin is
the correlation of cause-effect among gross-profits and goods sold. The reason for the decline in
gross profit is the rising cost of products produced by the company.