Financial Decision Making

Financial Decision Making

Contents
EXECUTIVE SUMMARY.........................................................................................................................3
PART 1: Industry Review...........................................................................................................................3
Current UK coffee house industry...........................................................................................................3
PART 2: Business Performance Analysis....................................................................................................4
2.1 Statement of profit & loss..................................................................................................................4
2.2 Statement of financial position..........................................................................................................5
2.3 Statement of cash flow.......................................................................................................................7
PART 3 Investment Appraisal Techniques..................................................................................................9
3.1 (a) Management Appraisal.................................................................................................................9
3.2 (b) Investment Appraisal.................................................................................................................10
Source of finance...................................................................................................................................11
REFERENCES..........................................................................................................................................13

EXECUTIVE SUMMARY
Financial decision-making refers to a systemic mechanism that leads to decisions related
to the obligations, securities and stock funds of companies. This section highlights the analysis of
Roast Ltd, the UK cafe chain's financial statements and other fiscal details to support Starbucks
in decision-making about the purchase of this coffee chain. The employee of fund department of
star bucks is asked by the Chief Financial Officer to reevaluate the budget and beauty of their
enterprise to obtain it later on. With this function all of the accounts are assessed which is why
ratios like net, gross and operating profit, debt fairness, current, quick ratios together side
operating cycle are all calculated. The organization decided to invest approximately 500 GPM
from the company also to ascertain the sustainability of the investment different methods are
used. The thing must arrange fund to invest in the projected job for that reason the direction is
suggested to have a financial loan by a bank in order that aims associated with job might
possibly be achieved successfully.
PART 1: Industry Review
Current UK coffee house industry
UK's coffee shop business is strong sufficiently encourage the growth of the nation as
whole. In addition to evaluate the industry analysis of it the following items may be regarded:
• As per a study, efficiency to the team of the coffee market in the GDP for the year 2017 was
approximately 3.7 billion pounds (Ahmed and Saravanaraj, 2016)
• It was projected that in the years ahead the company's sales would grow by 4.8 per cent as well
as the sum total of them would be about 6.6 billion pounds.
• There are also many organizations working in this field. Those are Raost Ltd., Espresso State.
Mcdonalds, Costa Coffee, Cafe 2U, Biscuit Break, Caffe Ritazza, Puccino's, Caffe Nero, etc.
• The real possibility available to organizations functioning in this business is to introduce these
espresso or other flavored coffee of it that are better suited to couch potatoes as they neglect milk
hot chocolate.

 This sector faces various types of problems as well as challenges that create problem in
current time.
 In present time this sector enhances their business activities at international level such as,
China, Australia and other markets.
 Over the past some time the company has been increased rapidly because of enhance
demand of coffee culture which is most prominent.
 Industry sales is projected to increase at a compounded annualized rate of 4.8 percent
over five years from 2019-20, plus 1.9 percent growth during current year, to around £6.6
billion.
PART 2: Business Performance Analysis
2.1 Statement of profit & loss
The analysis of P&L statements involves analysing the various line components in a
statement, as well as drives the development for particular items listed across several intervals.
This technique is used to recognize the price structure of a corporation, and its profit-making
ability. All the company factors create accounts on annual base for the role of recording most of
the direct, indirect, operating and non operating expenses together side incomes therefore that
adulthood might possibly be projected. As a way to pull many investors it's essential for the
organization to be certain its own income invoice is formed in orderly manner to ensure outside
parties may gauge the probable yields that might possibly be generated by these (Almenberg and
Dreber, 2015). In this framework, Roast Ltd 's revenue-statement analysis describes the company
's average has enhanced from £2022000 to £2534000 (25.32 percent growth) between 2017 and
2018, while the company's sales costs have altered from £1505000 to £1990000 between 2017
and 2018. Operating income for the Company in 2018 was 60,000. On the other side operating
costs increased from £ 466,000 in 2017 to £477,000 in 2018. During 2018 and 2017, Roast Ltd
reported operating profit of 127000 and 51000 signifying an upward pattern, in both. In 2018 and
2017 in both, the as a whole net profit of the company was 81000 and 36000, that also
demonstrates that the economic profit level of the corporation has been doubled. For the purpose
of assessing financial performance of the business subsequent ratios are computed: