Financial Decision Making

FINANCIAL DECISION
MAKING

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
PART 1 :INDUSTRY REVIEW.....................................................................................................1
PART 2 : BUSINESS PERFORMANCE ANALYSIS...................................................................2
2.1 Statement of Profit or Loss....................................................................................................2
2.2 Statement of Financial position............................................................................................5
2.3 Statements of cash flows........................................................................................................8
PART 3 : INVESTMENT APPRAISAL ......................................................................................10
3.1.a Management Forecast .....................................................................................................10
3.1.b Investment appraisal techniques ......................................................................................10
3.2 Sources of Finance...............................................................................................................11
REFERENCES..............................................................................................................................14

EXECUTIVE SUMMARY
The report will be revealing about the present scenario of cafe industry. Cafe industry of
UK is growing with a good speed along giving rise to coffee culture. Report includes the
analysis of financial statements of Roast ltd. The financial statements of company reveal
represent good and healthy position from its core. Making deep analysis through analysis it could
be identified that it is suffering from critical stage. It is showing profitability growth in the
present year where company in actual has negative in cash balances. Company has run out of
cash due to its expansions plans as it has purchased inventory, equipments and property in
Romania. For expansions plan it has also taken loans from banks that has raised its financial cost.
Company is planning to expand its business for whir it is requiring investment of £400 m. For
knowing the viability of investment various investment appraisal techniques have been used.
PART 1 :INDUSTRY REVIEW
Industry of cafe and restaurants also includes the establishments that are unlicensed and
and focus over the sales of coffee, hot and cold drinks and snacks. The coffee shop market of UK
has grown by 7.9% during 2018 in turnover representing consecutive 20 years of outlet growth
and sales. Industry leader are having discussions on negative impact of trade and consumers
confidence that can blow the sector off in 2019. As per the reports of Allegra world coffee Portal
on cafe industry of UK, revealing that cafe and coffee shops market of UK is valued at £10.1 bn
around 25,483 outlets. Annual sales have increased with 7.9% cemented from growth of two
decades. The turbulence because of Brexit is impeding the sector.
Branded cafes have secured outlet growth of 8.7% in 2018. fragility in economy of UK is
a concern for the industry. Coffee shops are vital piece of the UK's high streets. Research shows
that cafes are placed well for catalysing the increasing consumers preference for the experience
and the digitally enhanced of retail concepts. Majority of the industry leaders are of the view
that social media is proving to be an effective marketing source (World Coffee Portal, 2019).
Costa Coffee, Starbusks and Caffe Nero have remained the largest players in Coffee industry of
UK with 2655 outlets, 992 & 683 stores.
Opportunities and Challenges
1

 Relationship of UK with EU is impacting coffee and cafe shops industry. Political
impasse is contributing towards the rising prices, labour shortages and consumer
confidence.
 Brexit is negatively impacting the industry and the economy and shops have to make
adequate measures for addressing the challenges.
 Major deals like acquisition by Coca Cola of market leader Costa Coffee for 3.9 bn and
acquisition of Pret A by JAB Holdings for 1.5 bn has introduced foreign investment to
coffee chain market of UK.
 It is forecasted that outlets of the country will be increasing and turnovers will be
increased with growth of 5%.
 Currency depreciations can make the imports of raw materials from abroad costlier.
PART 2 : BUSINESS PERFORMANCE ANALYSIS
Analysing the performance of company using appropriate methods.
2.1 Statement of Profit or Loss
Analysing the effects Financial performance of Roast ltd using the relevant ratios.
Statement of Profit or Loss for Harridges Ltd for the year ended 31 December
Particulars 2018 2017 2018 2018 2017
£'000 £'000 Evol'n % of Sales % of Sales
Revenue 2534 2022 25.32%
Cost of Sales 1990 1505 32.23% 78.53% 59.39%
Gross Profit 544 517 5.22% 21.47% 20.40%
Other operating
income 60 0 2.37% 0.00%
Operating Expenses: 477 466 2.36% 18.82% 18.39%
Operating 127 51 149.02% 5.01% 2.01%
2