Financial Decision Making: Industry Review, Business Performance Analysis, and Investment Appraisal

Financial Decision making

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
PART 1............................................................................................................................................1
Industry review............................................................................................................................1
Part 2: Business performance analysis............................................................................................2
2.1 Statement of profit and loss...................................................................................................2
2.2 Statement of financial position..............................................................................................4
2.3 Statement of cash flow...........................................................................................................6
PART 3............................................................................................................................................8
3.1................................................................................................................................................8
3.2 Sources of funds....................................................................................................................9
REFERENCES..............................................................................................................................12
Table 1Performance analysis of income statement.........................................................................2
Table 2Percentage change in elements of operating expenses........................................................3
Table 3Change in assets and liability..............................................................................................4
Table 4Inventory turnover ratio.......................................................................................................6
Table 5Receivable turnover ratio.....................................................................................................7
Table 6 operating cycle period 2018...............................................................................................7
Table 7Operating cycle 2017...........................................................................................................7

EXECUTIVE SUMMARY
Financial decision making is the process which is responsible to take all the decision
which are related with the liability as well as stockholder's equity. Moreover, it is another crucial
decision which is further made by the financial manager of the company in order to financing
financing mix of an organization. The current study is based upon the case study of Roast Ltd
which is an independent coffee house chain in UK and with the emerging of modern age,
company also provide free WiFi and mobile devise to their local cafe that helps to boost its
performance.
The report will describe top- line review of the current UK coffee house industry which
includes key players i.e. Costa Coffee, Starbucks and Caffe Nero. In addition to this, study
shows that Coffee shops helps in the growth of economy and its market share also increased
from last many years. Further, report will describe business performance analysis that includes
statement of Profit and Loss, financial position, Cash flows. Such that data reveals that company
have good financial performance because in 2018, profit raise just double from 2017 to 2018. its
Lastly, report critically evaluate the investment appraisal through management forecast,
investment appraisal techniques, and then it provides two alternative source of finance for further
investment. Further, the GPM of the company is good which shows that Starbucks may acquire
Roast Ltd.
PART 1
Industry review
 In UK, branded coffee shops helps in the growth of economy such that it robust around
8.7% of the outlet growth in 2018 but it also reaches to around 8000 stores in UK. Even
through secondary research, it is also analyses that around 45% of the marketing is done
through social media but all the customer prefer to have a good quality which plays a
biggest factor behind the cafe success.
 But on the other side, due to UK's future relationship with EU which also leads to
frustrate the coffee industry in opposite way such that it leads to labor shortage, sudden
increase in prices of product, changing in customer preferences. This also affect the
overall market in opposite way (Coffee industry of UK, 2018).
 In addition to this, Costa Coffee, Starbucks and Caffe Nero are the key players of coffee
industry in UK with have more than 2500 outlets, around 990 and approximately 650
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stores at world level. But in future, the industry also wants to expand around 10000
outlets in 2023 so that it also helps to increase the economy of the country up to 5%.
 It has been analyzed that in year 2018, Coffee industry has been on boom. They have
contributed highest to gross domestic product of United Kingdom. Coffee industry has
also generated huge amount of employment opportunities. This has supported united
kingdom in increasing the economic lifestyle of people. It has also enhance living
standard of people. The indirect multiplier impact that arise through the activities
stimulated in the supply chains of those engaged directly in the production, supply and
serving of coffee. It has also been interpreted that the contribution of GVA is pound 9.1
billion in the year 2017. Coffee industry in year 2017 has raised tremendously. IT has
also made use of many advancing technology.
 Coffee shop in United Kingdom has increased and it has reached up to 8000 stores. The
largest branded coffee chain has also so many numbers of outlets. Like for example
Starbucks have 2655 outlet in United Kingdom. This sector has shown tremendous
growth. They have also contributed large amount to gross domestic product of United
kingdom. It has impacted the economy in a positive way. The industry have also been
impacted by Brexit. It has laid positive impact on the industry.
 From the above, it has been concluded that due to high growth from 2017 onward, coffee
sector also develop many investment opportunities such that it reach up to 8000 stores
and also contribute its best for the growth of economy. Moreover, by 2023, the company
also increases its growth up to 8% by increases the economy of the country.
Part 2: Business performance analysis
2.1 Statement of profit and loss
Table 1Performance analysis of income statement
2018 2017 Difference
Revenue 2534 2022 25%
Less: Cost of sales 1990 1505 32%
Gross profit 544 517 5%
Other operating income 60 0
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