Financial Performance and Investment Analysis: Roast Ltd Report

This report provides a comprehensive financial analysis of Roast Ltd, focusing on its performance in 2017 and 2018. It begins with an industry review of the coffee house market in the UK, including the impact of Brexit and the competitive landscape. The business performance analysis includes an examination of the statement of profit and loss, statement of financial position, and statement of cash flows, with detailed analysis of sales, expenses, and profit margins. Investment appraisal techniques, such as payback periods, accounting rate of return, and net present value, are discussed in the context of potential investments, particularly in Romania. The report also explores the sources of finance available to Roast Ltd, including bank loans and venture capital. The analysis considers the company's potential merger with Starbucks Ltd and provides recommendations based on the financial data and market conditions.

FINANCIAL DECISION MAKING

Executive Summary
The research study shows that Roast Ltd has been very successful in the year 2017 with the
number of sales of £2022000 in the same year and £2534000 in the year 2018. The “profit
before interest and tax” also raises from the fiscal year 2017 to 2018. Many types of planning
are done to make the "merging and acquisition" to be successful with Starbucks Ltd.
Therefore the Company execute a plan for merging with "Starbucks Ltd". There are many
types of "tools and techniques" which are used for analyzing the reports based on different
types of financial aspects generated in the UK markets.
The section of “industry review" comprises the correctness of financial performances which
has been calculated for the performance of the Company in the "the financial year of 2017-
2018". The right use of the tools has been interpreted and analyzed in this section for the
better result
The business analysis section comprises different methods of investment appraisals which
have been mostly used to detect several performances based on the investments done in the
country like “Romania”.
The “investment appraisal section” is mostly dependent on different types of approaches that
are used for financial analysis of Roast Ltd. It is also able to measure the strengths of Roast
Ltd for “mergers or prospective acquisition” done with Starbucks Ltd.
The source of finance sections is based on the decision by Starbucks to enquire Roast Ltd by
the process of supporting analysis from the various types of reports from business
developments. The Bank loans are also provided to the Company for financial support and
run the business in the market smoothly.
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Table of Contents
Part 1: Industry Review..............................................................................................................4
Part 2: Business Performance Analysis......................................................................................4
2.1: Statement of Profit and Loss...........................................................................................4
2.2: Statement of financial position........................................................................................6
2.3: Statement of Cash Flows.................................................................................................7
Cash Positions........................................................................................................................7
Part 3: Investment Appraisals.....................................................................................................8
3.1 a) Management Forecast...................................................................................................8
3.1 b) Investment Appraisal techniques..................................................................................8
Payback periods......................................................................................................................8
Accounting Rate of Return.....................................................................................................9
Net present value....................................................................................................................9
3.2) Sources of Finance........................................................................................................10
Bank Loans...........................................................................................................................10
Venture Capitalist..................................................................................................................11
Recommendation......................................................................................................................12
Reference list............................................................................................................................13
Appendices...............................................................................................................................15
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Part 1: Industry Review
The research study mainly focuses on the process of reviewing the industry in various ways
which can evaluate the performance of the Company. There are various types of roles that are
conducted for analyzing the performance of the Company, and the competitiveness role
played between these companies (Dale and Plunkett, 2017). The research has taken place for
the retail business of the coffee houses present in the UK market. The chain of the coffee
house has been identified which is present in the markets of the UK. There are some specific
roles that have been played by Brexit which provide some final outcomes that are based on
the economic breakdown of many countries present in the same retail chain of business. The
number of companies which are affected by Brexit are 500 companies. The branded
Company like "Starbucks Ltd" is also affected and provides good "products and services”
throughout the world sector with more than 90 retail outlets present in the current period
(Schaltegger, and Burritt, 2017). There are a few challenges that are faced by the coffee house
industry are listed below:
● The number of competitors present in the market has increased
● The growth of the financial conditions of this coffee house sector has decreased to 6%
in the year 2016-2017.
● Some proposes are provided by Brexit of some dangers and threats to these sectors
● The danger arises mainly due to “mergers and acquisitions”.
● Some Fluctuations occurred in the specific market situation as per the current
economic status.
● There can be huge changes in the customer segments due to the traditional aspects.
Part 2: Business Performance Analysis
2.1: Statement of Profit and Loss
This statement of any company mainly helps to evaluate the analysis of the Company's
performance. The analysis of "statement of profit and loss" is evaluated in the financial year
of 2017 and 2018. Many ratios have also been analyzed for evaluating the performance of
"Roast Ltd". The business that has been conducted by these companies is considered to be
running a reputed business with a brand name in the market (Zardari et al. 2018). Capitals are
invested in the business for the return of profits. Through the collection of profit, a huge
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amount of revenue is accumulated through the process of sales, which helps the Company to
run the business smoothly. The financial health condition of the Company is stable and good.
The financial statement has been provided and the profit gained from the Company was
£2022000 in previous year 2018 and for the year 2017 is £2534000. There are some specific
sales expenses that are also listed in the “actual value” sections which are mainly generated
from the actual sales (Böhm et al. 2017). The specific amount of sales also generated in the
financial statement, which is having a negative balance that occurs in the operational
activities of the Company. The basic earnings of the gross profit were estimated to be
£544000 in the year 2018. Therefore the gross profit that has been calculated in the previous
year of 2017 was £517000.
The analysis of the industry is done through the process of anticipating the specific
"profitability ratio" generated through the increase in competitors present in the market. The
coffee house industry has developed its industry as per the increased demand of the
customers present in the market (Cornett et al. 2019). The analysis of the financial
information is also established through the several ways of creating the utilized resources that
are the part of updating the "profit and loss statement". "Roast Ltd" is also provided with all
types of information based on UK based coffee houses.
There are some effective ways of utilizing various types of resources which are gained with
"21% of the margin in the year 2018 and 26% in the year 2017". The profit margin ratio has
also decreased from the previous year results (Flammer, 2018). Therefore the accounting
information system is mainly used for ensuring different basic outcomes of the business and
the forecasts that are required to become a profitability business. The specific net profit ratio
for the financial year 2018 shows 3% and also 2% in the financial year of 2017.
There is also a great amount of increase in the profitable ratio, which also provides firm
stability to the Company (Gonenc and Scholtens, 2017). It brings a stable business that will
perform well in the global market. The use of ratio analysis is made for some stable images of
the financial conditions of the Company. The provided data from the financial statement are
to be used for the purpose of developing the "ratio analysis". The basic outcome for the
"operating expenses" of the Company is also related to the negative cost which has increased
due to the several expenses that have been encountered in the last few years (Karna et al.
2018)
Some costs have been incurred from the Company which are used in achieving the several
types of profit on the basis of "financial grounds". There is a correct amount of information
that is achieved during the conduct of the business. The deduction of “income tax expenses”
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situated in the “final net profit” also provides the outcome in “£81000 and £36000 in 2018
and 2017”. Therefore the right types of the “income statement” also shows the specific types
of perfect segmentation of expenses and costs generated along with the revenue balances of
Roast Ltd (Kulikova et al. 2018). Generally, the income statement of the Company also
shows some perfect process of segments that are based on costs and expenses that are related
to the revenue balances of "Roast Ltd". The financial statement also shows the net income
which results £45000 of the financial year of 2017. There are also some specific outcomes for
the results that have been incurred through the funds of the Company and the cost expenses
are negotiated based on operational activities of "Roast Ltd". The financial performances are
mainly identified through these financial statements of the Company. [Referred to Appendix
1]
2.2: Statement of financial position
There are different types of tools and techniques that are present and used by the Company
through the financial position. Few data is provided through the financial position where the
"acquisition of the business" is done (Laird and Venables, 2017). The acquisition of business
also provides some of the high priority that are achieved in several companies due to many
types of “financial activities”. Roast Ltd are also following some of the standard procedures
which are mainly based on the “accounting standards and principles”. The specific
implementations are made through the generation of some accounting principles and also
standards (Nimtrakoon, 2019). Some specific standards are related to the several activities
that are generated through the operational activities of the Company. The right performance
of the also reflects the trading system to other competitors present in the market. There is an
increase of production level by following a fixed path that has been generated to improve the
quality of the coffee beans. The priority of the Company is to affect the specific satisfaction
level of the customers which will be able to attract more customers from the market. The
management of the Company has decided to increase the "cost of production" but still not
applied the extra costs on the customers. This process has gained the goodwill of the market
and able to provide good quality products and services to the customers (Nollet et al. 2019).
The stronger goodwill makes the Company hold a strong position in the market. The revenue
which has been incurred through the operating sections of "Roast Ltd" has increased up to
80%. There is a huge plan made by the management of the Company to expand the business
in other parts of the world, too (Pineda et al. 2018). The main objective of the Company is to
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facilitate the customers with good quality products and able to make sales in different
sections. The stores of "Roast Ltd" are also able to operate with different types of systems
and equipment that are based on advanced technologies. There are also some types of
fluctuation occurring during the targeted sales of goods which are mainly composed through
better quality of services.
The financial position of Roast Ltd created a good reputation in the financial year of 2017.
Many types of expenses are made by the business of Roast Ltd (Van der Walt and Boshoff,
2017). The sales of the Company has also increased since 2017. This provides an extra
income to the business and able to attract more customers.
2.3: Statement of Cash Flows
Cash Positions
The cash flow is involved in every type of business conducted by the Company. The cash
flow of the business is mainly related to the different types of operational activities that are
conducted by the Company. The negative balance has incurred from this cash flow statement
which amounts to £358000. The cash inflow in the business and outflow from the business is
related to the operating activities generated which determines the incomes and expenses of
the business (Xiong et al. 2019). The Cash flow statement requires proper maintenance for
the evaluation of healthy performance of the business. The funds of the Company should be
used properly so that the demands of the customers can be fulfilled. The management
activities of the Company should be directed well for the present "UK and Romania market"
which are also used for the process of differentiating the perfect "financial performance of the
company". Some automatic outcomes are naturally related to the several "negative outcomes"
as a result of the Company (Zhang et al. 2019). The operating expenses also incur a huge
amount of losses which include £24k of the Company. There are also different types of
expenses that are listed in the cash flow. The amount of losses does not represent a good
image of the Company to the market or in front of the customers. The amount of net cash is
also generated through the various types of operations that results in zero. The net cash or
cash equivalent of “the financial year of 2018 is £-2017000”. (academia.edu, 2020)
[Referred to Appendix 2]
The “operating cash cycle” which is represented as 16 years for showing the Company it can
transact the money back in this period. The calculation of "operating cycle" is measured
through the evaluation process of the cash flow. The cash amounts which are receivable are
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mainly generated through the various process of investment. The Company has also decided
for the fixed amount of percentage that is derived from several from the fixed percentage of
cash invested, which is calculated with value. (businessperspectives.org, 2020)
Part 3: Investment Appraisals
3.1 a) Management Forecast
This report is presented through the process of issuing the “project cafe UK, 2019” in which
there are various segments that have performed well in the coffee industry. This growth also
provides the statistics of continuous 21 years of sustainable increase in the growth rate. There
are many types of coffee industries that are present in this growth rate which stands for “8.8%
in the fiscal year of 2018-2019”. The increase in the growth rate is only possible due to more
than 8200 stores that are working and performing all around the world. (real.mtak.hu, 2020)
Roast Ltd has a large amount of capacity that has merged with Starbucks Ltd and is also able
to fulfil the various requirements that are needed for the specific merging process. There are
some specified situations established by the management of Roast ltd for improving the
financial capabilities of the Company. This will give help for both the companies to be
financially strong enough to support each other. The merging of both the "Roast Ltd and
Starbucks" has the capability of creating a huge amount of revenue by providing good
products and services. The investment appraisal also provides a specific suggestion for the
contribution of 5th year, which depends on different aspects of "revenue expenditure." There
are also many types of “variable cost expenses” that are related to the rise of “5th year of
£896”. The increase in the level of the incomes are also distributed through some normal
“cash inflow” that has been generated in the business of the Company. The “management
forecast” also depended on the effective process of merging completed of the two companies.
The success of merging will create the potential acquisition of “Roast Ltd with Starbucks
Ltd”. (money.cnn.com, 2020)
3.1 b) Investment Appraisal techniques
Payback periods
The payback period is considered to be the basic requirement of various processes of
recovering the several types of expenses that are accumulated through the process of
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underlying by “Roast Ltd”. There is also some specific invested time interval that is
generated with the increase rate of the effectiveness. The basic time interval is also used for
the process of searching the “break-even point”. There is also research work that has been
generated through the process of “Roast Ltd” that has been shown with the help of specific
payback period generated in the 5th year. The value of the payback period in the 5th year is
estimated to be £224 million. The 4th year cash flow generated by the UK government
official is recognized through revenues incurred from the business. The result of the 4th year
cash flow is generated as £180 in the UK. (Starbucks.in, 2020) [Referred to Appendix 3]
Accounting Rate of Return
Roast Ltd also acquire many types of information through "Accounting Rate of return"
which is based on the 10% of the generated objective. The Company also achieved a higher
rate of return, with 18% of the accumulated profit. The outcome also shows the ability of the
Company and the performance done by the management to attract more customers from the
market. This type of results also shows that the Company is ready or not for merging with the
other countries. There are some normal results which show the various types of the ability of
the Company that discloses the evaluation of merging of "Roast Ltd with Starbucks Ltd".
Some basic average systems are also distinguished with the other prospective natures that are
distributed against the annual rate of profit. The normal strength and performances are also
evaluated through different perspectives that originate through some of the financial
structure. The strength of the business can be measured through the “accounting rate of
return”.
Net present value
The "net present value" of the Company generally helps to understand the actual value of the
project or the business. Different types of investment plans are made through the calculation
of NPV where the project is invested. The positive result of NPV also resulted in £110
million. The investors present in the market also tally the "net present value" of the Company
for any further investments to be done in the near future. The actual Value of Roast Ltd is also
earning a large amount of profit which has been gained through the "merging and acquisition
project". The profitability rate of Roast Ltd is also considered to be very high with the
increase rate of investments done in the business.
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Figure 1: Appraisal Techniques
(Source: Self-created)
3.2) Sources of Finance
Bank Loans
“Bank loans” collect finance from a source that is easily relied upon. Roat Ltd takes the aid of
these sort of financial institutions to distinguish the multiple types of "business loans" to
recover the amount of debt. In a general sense, the bank loans are provided with the
phenomenons of rates of interest as well as repayment periods. The mentioned procedure is
undertaken with the help of the B2B approaches is-“business to customers''. the utilization of
the bank loans are advised by the "Chief Financial Officer" or the CFO as it facilitates the
Company to distinguish the fixed assets that are taken in count for over a investment of
400,000 Euros. These sort of loans trace their utility in both long term as well as short term
activities of an organization. The merits if Bank Loans are as follows:
● Utilization of the emboldened bond between the banks with their money lenders.
● Relieved from the aspect of income Tax
However, the code-merits or the shortcomings that the loans taken from banks can also be
evaluated, which are as follows:
● The perils of penalties as well as charges.
● The humongous amount of degree of liabilities
● The “programme of repayment” followed stringently
● The subscription rate is exponentially high in the course of loan processing
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Payback
periods
Payback
periods Net Present
Value
Net Present
Value

The above mentioned financial institutions and “sources of finance” invest in multiple small
scale organizations and offer various monetary benefits that are obtained from “bank loans”.
The benefits are also derived from them in safeguarding various business operations that are
undertaken by companies in leveraging their growth.
Venture Capitalist
The venture capitalist also forms a major source of financial aid for the Road Ltd company.
A market can't be undertaking various works from the merger system, that won't be able to
access the whole market in case of the equi\ty shares. The Roast lots are showcasing a sound
performance for "prospective acquisitions merger regarding Starbucks". The venture capitals,
along with funding the capital, help in the overall financial growth of the Company.The aids
are listed below:
● Assistance in establishing viable binds with a prolific network system.
● We are providing overall support for the financial and overall Company's expansion.
● We are supporting various organizations regarding achieving developed investment
procedures.
● We are offering an array of guidance placoderms as well as promotional platforms
for increasing the Company's proficiency.
There are also several drawbacks or demerits attached to their “sources of finance” who are
as follows:
● Grabbing a hefty chunk of the Company's share
● Requirement revolving around an increased return rates
● The aspect of “long term” process of decision making that generally caters all the
monetary support to the organization
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Bank
Loans
Bank
Loans Venture
capitalist
Venture
capitalist

Figure 2: Sources of Funds
(Source: Self-created)
Recommendation
● The "Chief financial officer gives the specific advice" also advised us to observe the
various activities and business operations taken by the Company. The "outstanding
operating income" established for good performance of the Company. The specific
source of the fund is also established through different operating activities that are
generated by the Company.
● The "CFO or the Chief financial officer" of the Company is also integrated with
special powers to recommend some of the activities which will increase the "net
profitability" of the Company. There are also some variety of sourcing funds that are
related to the several types of operation activities that are conducted through the
generation of large amounts of funds.
● The use of "operating cash cycle" is also used for operating different types of
investments under the supervision of "Chief Financial Officer". There is some sort of
setbacks which are used for the number of companies that are represented by the
selected companies.
● The process of "Management Forecast" is also used by the "Chief Financial Officer"
to increase the "five-year plan for near about 224 million in the UK".
● There are many types of venture capitalists that are present in the market for the
extraction of money from the specified business. The invested money is acquired
through the process of some relevant funds that are acquired through the venture
capitalists.
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