Financial Decision Making

Financial Decision Making

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
PART 1: INDUSTRY OVERVIEW................................................................................................1
PART 2: BUSINESS PERFORMANCE ANALYSIS....................................................................4
2.1. Statement of Profit and Loss................................................................................................4
2.2 Statement of Financial Position............................................................................................5
2.3 Statement of Cash Flows.......................................................................................................7
PART 3: INVESTMENT APPRAISAL .........................................................................................8
3.1.a. Management forecast........................................................................................................8
3.1.b. Investment Appraisal Techniques.....................................................................................9
3.2. Sources of Finance.............................................................................................................11
REFERENCES..............................................................................................................................13

EXECUTIVE SUMMARY
Financial decision making is an effective process which is very useful in making all
related decisions associated with the shareholders and liabilities of organization (Engle-Warnick
Pulido, D. and de Montaignac, 2016). Financial decision making is considered to be the strategic
methods which helps in making various financial decision in order to smoothly carry out several
business operations to achieve organizational goals and focus on maximizing profitability.
Starbucks is considered to be one of the largest coffee house company across the globe.
Starbucks tend to have approximately 988 stores in UK.
 Roast. Ltd is in very good position as it generates higher profits by effectively
maintaining the capital. This in turn encourages Starbucks to acquire Roast Ltd.
 Roast Ltd. has a positive net margin because it helps to convert its sales into the profits.
This is one of the most beneficial and attractive source for the Starbucks to acquire the
business operations of Roast plc.
 Roast Ltd tends to have lower liquidity ratios, but it tends to have good debt to equity and
gearing ratio which helps in effectively meeting its debt obligations. This in turn attracts,
Starbucks to acquire Roast Ltd.
 Starbucks needs to take into consideration factors related with high receivable and
payable days.
 Roast Ltd. Tends to have effective credit position and in turn tends to focus on effectively
carrying out sever al business operations.
 Roast Ltd. also tends to focus on expanding its business to Romania. This is considered
to be an effective measure for Starbucks to carry out business across various part of the
globe.
PART 1: INDUSTRY OVERVIEW
Roast Ltd. is a coffee house chain which was established in 2008 in Romania, UK. With
the digital age, it has become one of the crucial part of the cafe culture. It tends to seek strong
supplier connection in Italy (Maye, Kirwan and Brunori, 2019).
It has been evaluated that, coffee industry has been growing at a greater pace.
Approximately 95 million coffee cups has been consumed on the everyday basis in UK (The
Economic Impact of the Coffee Industry, 2019). Over 2.25 Billion coffee cups has been
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consumed in the world on the daily basis. The UK coffee market is considered to be the 5th
largest coffee consumer in the Europe. Growth in the coffee industry has led to improvement in
the working of the economy (Aerts,., Berecha, and Honnay, 2015).
 90% of the coffee production has been taking place in the developing countries.
 UK coffee market contributes around £17.7 Billion in the UK economy.
 UK coffee market has generated annual sales of 4 billion from across 7470 coffee shops
in the UK (Ferreira, 2017).
 The UK coffee market tends to grow 10% every year which has led to high degree of
employment with 210,325 job opportunities.
 The revenue generated in the UK in 2019 from coffee market is estimated to be US$
8,087 million and average revenue per capita is estimated to be US$ 119.76.
Key players in coffee house industry
Costa Ltd: This is one of the leading coffee house chain and is the subsidiary of the Coca
Cola company. Costa Ltd was founded in 1971 by Bruno Costa and Sergio Costa and is
headquartered in Dunstable, England, UK (Kanapickienė and Grundienė, 2015). Costa coffee
Ltd tends to operate 2,467 outlets in United Kingdom and around 1,412 outlets across the globe
in 31 countries.
Starbucks: It is an American coffee house chain and cooperation which was founded on
31st March 1971 by Jerry Baldwin, Zev Siegl and Gordon Bowker. It is headquartered in Seattle,
Washington, United states. Starbucks tend to have approximately 988 stores in UK. It is
considered to be one of the largest coffee house company across the globe which is the key
opportunity for the business to grow and expand its business in several other locations. The
major challenge faced by the Starbucks is associated with the rise in the price of the coffee
beans. The major opportunity associated with Starbucks is that, expansion and diversification of
business in developing markets.
Caffe Nero group: This is the premium European coffee house company which was
founded in the year 1997 and is headquartered in London, England, UK. This company carry out
its business operations of 1000 coffee houses in across 11 countries. It has around 566 outlets in
United Kingdom.
Key challenges faced
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