Financial Performance Analysis of Cup O'woe: Business Research Project

This presentation analyzes the financial performance of Cup O'woe, a family-owned coffee shop in Freetown, Sierra Leone, facing financial challenges. The research investigates the impact of competition on its revenue and profitability, revealing a negative correlation between competition and financial performance. The study employs a quantitative approach, collecting data through interviews and questionnaires from employees and customers. Data analysis includes reliability and correlation analysis, with findings indicating that competition significantly affects Cup O'woe's financial health. The presentation discusses additional factors contributing to the financial distress, such as customer service and poor accounting practices, and offers recommendations for strategies to handle competition and improve overall profitability. The research concludes that while competition is a primary factor, addressing internal issues is crucial for the SME's sustainability. The presentation also includes a scatterplot demonstrating the relationship between financial performance and competition, and provides an equation to model the same.

Cup O‘woe- Family Coffee Shop
Address: Freetown, Sierra Leone
Phone: [insert phone number]

Problem statement
 Cup O‘woe is a family business faced by the problem of poor financial performance
 This business can barely use its available assets to generate revenues.
 Besides, Cup O‘woe expenses are rising above the sales thus, operating at a huge
deficit. The business’ cash balance is demonstrating negative long-term growth.
 This low and stagnant balance indicate that Cup O‘woe is not sustainable.
 Generally, the profitability of our business is not on the healthy side
 It is hypothesized that intense competition from competitors is major contributor
to poor financial performance at Cup O‘woe .
 The primary purpose of this presentation is to demonstrate a research process that
can be used to solve this problem.

Literature Review
 Small-business owners lack proper accounting knowledge and as a result, make
mistakes relating to cash flow management, debt service or incorrect pricing all of
which lead to poor financial performance.
 Common financial issues that are affect startups include losses, deficits, low cash
flows, inadequate resources, excessive expenditures, and huge debts.
 understanding the various reasons that make SMEs suffer from financial problems
assists owners in taking steps to avoid them and handle any that arise.
 Examples of reasons behind financial distress include impractical budgeting and
pricing, poor debt management, unsatisfactory accounting practices, and low
sales/high expenses.

Cont.
 Internal factors are
issues like unsuitable
product mix, wrong
location, and poor cash
management that the
business has control
over.
 External factors are like
government
legislations that the
business cannot control
in any way.
Factors that lead to financial problems are either internal or external

Research Objective
 From literature review, it has been noted that there is a
relationship between financial performance and
competition.
 In this study, competition will be the independent
variable whilst financial performance will be the
dependent variable.
 So, the primary purpose of this research is to answer
the following questions:
i. To study how competition from other SMEs affect
the financial performance of Cup O‘woe
ii. To investigate how the financial performance of
Cup O‘woe be improved

Research Methodology
 Quantitative approach is adopted for this research that intends to unearth the
major cause of poor financial performance at Cup O‘woe.
 The population of the study consists of employees from Cup O‘woe and a group of
customer representatives.
 The sample comprises of 13 workers and 9 customers so a total of 21 respondents.
 All employees have been included in the sample but the customer respondents
have been chosen from a population of 30 customers using simple random
sampling method to ensure every one of them has equal chances of being selected.

Data collection
 For the purposes of this
research, interviews have
been conducted to source
primary data from the
participants.
 Personal interviews will
enable staff and customers to
give their opinions regarding the
issue of financial performance at Cup
O‘woe.
 Apart from one-on-one interviews,
the respondents have been provided
with semi-structured questionnaires
Some sample questions included in the semi-structured questionnaire:
Question 1: What do you think might be the major challenge facing Cup
O‘woe?
Question 2: What do you think might be the major factor affecting the
financial performance of Cup O‘woe?
Question 3: Do you think Cup O‘woe has an opportunity to develop in size.
Why or why not?
Question 4: How can Cup O‘woe increase its revenue and profitability?

Data analysis
Reliability Analysis
 Opinions of the respondents on the key subject matter are presented in a five
point Likert scale and the results are as follows:
 From the reliability statistics table above, it is clear that the two variables
have Cronbach’s alpha ranging above 0.700. This proves that the
questionnaire used to collect data is reliable

Cont.
Correlation Analysis:
 Pearson’s Correlation analysis has
been used to identify the correlation
between the level of competition and
financial performance.
 From the analysis, Pearson’s
correlation coefficient is 0.432 which,
at 1.00% significance level is
statistically significant.
 So the outcomes indicate that
competition has a strong negative
correlation with financial
performance

Findings
 The results of the study indicate
that there is a negative
correlation between
competition and financial
performance.
 This means that the higher the
level of competition in the
market, the poorer the financial
performance at Cup O‘woe is.
 These findings are in agreement
with the business owner’s
assumptions that competition is
the key contributor to low
revenue and profitability.

Interpretation
0 5 10 15 20 25 30
$0
$100
$200
$300
$400
$500
$600
$700
f(x) = − 16.434516601048 x + 695.862513213723
R² = 0.840650944487182
competition intensity
Revenue
 The relationship between
the financial performance
and competition can be
confirmed by use of a
scatterplot as show.
 From the equation of a
straight line: y=mx + c
o Where
o y- revenue
o M-slope
o X-level of competition
o C- y-intercept
 From the graph, this
equation is:
Y= -16.435x + 695.86

Cont.
 The R-value of a scatterplot
between competition and
financial performance equals
0.8407.
 This means that 84.07% of the
variance (influence) of revenue
at Cup O‘woe can be
accounted for by the market’s
level of competition.