Financial Decision Making

FINANCIAL DECISION
MAKING

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
PART 1: INDUSTRY REVIEW.....................................................................................................1
PART 2 : BUSINESS PERFORMANCE ANALYSIS...................................................................3
2.1 Statements of Profit or loss....................................................................................................3
2.2 Balance Sheet Statement........................................................................................................6
2.3 Cash Flow Statement.............................................................................................................7
PART 3: INVESTMENT APPRAISAL..........................................................................................9
3.1.a Management Forecast ........................................................................................................9
3.1.b Investment Appraisal Techniques ....................................................................................10
3.2. Sources of Finance .............................................................................................................11
REFERENCES..............................................................................................................................13

EXECUTIVE SUMMARY
Financial decision making is considered to be one of the most effective procedure which
is highly responsible for making strategic decision associated with the equities, liabilities and
stakeholders of the company. It s considered to be an effective tool in order to maximize the
profitability of the company (Lu, Won and Cheng, 2016). Financial decision making is
considered to be very useful in gaining relevant in formation by effectively analysing the
financial reports of the company. This in turn helps in making investment decision, determine
financial position which in turn helps in making strategic decision. Starbucks is an American
coffee company which is headquartered in Seattle, Washington. It was founded in the year 1971
and has approximately 988 stores in UK.
 Roast Ltd. is considered to be in a very strong position because it has enough financial
capital. This in turn influences Starbucks to acquire Roast Ltd.
 The net profit margin of the company is increasing exceptionally which in turn states
that, Starbucks must acquire Roast Ltd.
 Roast Ltd expansion of business operations in Romania is considered to be an effective
opportunity for the Starbucks to carry out business across several parts of the globe.
 The profit of the company has been increasing which is one of the key reason for the
Starbucks to effectively carry out business operations.
 The return on equity of the company is increasing which in turn indicates the better
measure for the efficiency. This is one of the effective measure for Starbucks to acquire
Roast Ltd.
 The return on capital employed of the Roast Ltd is increasing which states that the
profitability of the company is increasing. This is one of the effective aspect for
Starbucks to acquire Roast Ltd.
 The current asset of the company is average which states company have enough cash to
mitigate its short term liabilities.
PART 1: INDUSTRY REVIEW
Roast Ltd is an independent chain which was established in UK, in the year 2008. It has
opened its first chain in Romania. They tend to focus on employing local people and also work
towards building a popular cafe culture which in turn leads to higher operational growth.
Britain is considered to be the nation of the coffee drinkers (Bradley and Botchway,
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2018). The coffee industry of the UK tends to be the fifth largest coffee consumer marketplace in
Europe. The British coffee market tends to grow at approximately 10% every year (The
Economic Impact of the Coffee Industry, 2019).
 The expected retail sales of the coffee in UK is about to reach 69 million Kg in the year
2019.
 The UK population consume around 70 million cups a day, around which 65% of which
is consumed at home, 10% at restaurants, bars and the remaining 25% at work.
 Around £17.7 billion of the UK coffee market is contributed into the UK economy
(Morland, 2017).
 The total turnover of the coffee products in the food industry is £3.2 billion in the year
2017.
 The UK coffee market supports around 210,325 jobs which is very beneficial for the
growth of the economy (Ferreira, 2018).
Key players within coffee house industry
Costa Ltd: It is a British multinational coffee house company which was founded in 1971
and is headquartered in Dunstable, Bedfordshire. As per May 2018, Costa coffee tends to operate
high number of coffee outlets i.e., 2467 outlets in the UK. On the other hand overseas it tends to
operate 1412 stores in across 31 countries.
Starbucks: It is an American coffee company which was founded in the year 1971 and is
headquartered in Seattle, Washington. As per the year 2018, Starbucks tends to have a total of
around 988 stores in UK. The key opportunity associated with the Starbucks is that, it has the
possibility to expand its business operations across the globe in various diversified market.
Caffe Nero group: It is a European style private limited company which was founded in
the year 1997 and is headquartered in London, England. Caffe Nero group has around 566
outlets in the United Kingdom. It has business opeartions in acros s 11 vountries by running
around 1000 coffee houses in UK, Turkey, Ireland, Croatia, UAE, Oman, US, Cyprus, Poland
and Sweden (Bradley and Botchway, 2018).
Key challenges faced
 The major challenge faced by the coffee industry is rise in the rents and cost of the
property which in turn has de-established several high street brands.
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