Finance Case Study: Assets, Liabilities and Cash Flow of Coffee Shop

This case study delves into the financial aspects of a coffee shop, examining its assets, liabilities, and cash flow. The assignment begins by defining assets as tangible and intangible items used to generate economic value, liabilities as obligations, and expenses as costs incurred in operations, including raw materials, salaries, and advertising. The case study also addresses cash flow problems, which can arise from low profits, credit issues, and unforeseen events, and suggests solutions such as cash flow forecasting and cost-cutting measures. A table is presented illustrating the net cash flow from operating activities, and investing and financing activities, showing the increase in net income and reduction of expenses. References to relevant books and journals are provided to support the analysis.

Case Study

Table of Contents
TASK 5............................................................................................................................................1
Assets, liabilities, expenses and gains of The Coffee ................................................................1
Avoidance of cash flow problems...............................................................................................1
REFERENCES................................................................................................................................3

TASK 5
Assets, liabilities, expenses and gains of The Coffee
Assets- Anything which is intangible or tangible which is produced, controlled or owned by a
company which it uses to produce economic value is called an asset (Haji and Mohd Ghazali,
2018). For a coffee shop assets can be the Espresso machine used to make coffee, coffee grinder,
food service equipments like microwave, refrigerators, furniture and decorative in the cafe etc.
Liabilities- these are the obligations to do something which the company owes to some one else.
For a coffee shop the liabilities are the long term borrowings from others, any loan taken from
the bank.
Expenses- these refers to the cost that a business incurs through its operations to earn revenue.
For a coffee shop expenses can be cost of procuring raw materials like coffee beans, coffee
filters, salaries, advertising and promotion, etc.
Gains- it is the result of the sale from the asset other than the inventory. For coffee shop it can be
sale of the fixed assets (Gornall, 2018).
Avoidance of cash flow problems
The cash flow problems occurs when a business does not have enough cash to pay its
obligations that is the liabilities. These problems are caused by low profits or losses, allowing too
much credit periods, over trading, unexpected changes and many more reasons. These problems
can be avoided by some measures like-
Cash flow forecast- this method requires to set targets for the future to keep the record of the
finance available and to avoid any shortfall if occur. It includes a simple forecast of the income
and the costs on the monthly basis.
Cutting down the operating cost- this is another way to avoid the cash flow problems. A cost
cutting goal can be established. Also employees task efficiency and productivity can be
improved by ways of different motivating techniques.
PARTICULAR 2018 2017
Operating activities
Net income £20000 £20000
Depreciation £100 £150
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Gain or loss £5000 £4500
Net cash from operating activities £25100 £24650
Investing and financing activity
Long term assets £500 £470
Investments £1000 £(1200)
Net cash from investing and financing activities £1500 £(730)
Cash at the end of the period £26600 £23920
In this we have assumed that income is increased as compared to last year and expenses
have been reduced so the net cash inflow increased.
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REFERENCES
Books and journals
Gornall, W., 2018. Safe assets and dangerous liabilities: How bank-level frictions explain bank
seniority. Available at SSRN 2526574.
Haji, A.A. and Mohd Ghazali, N.A., 2018. The role of intangible assets and liabilities in firm
performance: empirical evidence. Journal of Applied Accounting Research. 19(1).
pp.42-59.
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