Financial Decision Making

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Executive Summary
Coffee industry is the highly competitive industry in market of UK but on the other profits are also getting higher. Financial position of company is week because profitability, liquidity and efficiency ratios are not showing effective results. Company fails to maintain proper liquidity in their company while it takes long time for conversion of inventory into sales and debtors converting into cash. On the other hand, company is also getting delayed to pay to their creditors because of which finance cost is increasing and ultimately net profits are decreasing. Also, OCC is also increasing which shows that company needs higher cash in order to fulfil operating cost. Company can go for accepting project as prepared by management forecasting but they should have proper evidences on the basis of which forecasting is been done. Company can go for accepting the project because under three capital budgeting methods, project is showing positive results. Starbucks can go for using basis of time for financing its company because it requires all types of loans for expansion of its business. Thus, Starbucks should go for acquiring Roast Ltd because it is having most of revenues from UK.
Part 1: Industry Review
• UK is tea-drinking nation but its focus is been shifting from tea to coffee lovers. As it can be observed with the growth of coffee consumption and it approximately contributes £ 17.7 billion to its economy.
• In year 2008, approx. 70 million coffee cups were consumers by UK’s consumers while consumption boosted up to 95 million coffee cups. In this, 65% coffee is consumed at home, 25% is consumed while working in offices or studying and 10% is drunk in shops and restaurants.
• UK is the 7th largest country in world that imports 165K tons of Green coffee beans mainly from producing countries such as Brazil and Colombia.
• Costa, Starbucks and Caffe’ Nero are the largest market leaders in the country as they cover more than the half coffee industry. These three market leaders’ covers 53% of total UK branded coffee shop segment. There are 20,000 coffee outlets in UK.
• More coffee consumption does not only give more turnovers to companies but it also increases jobs in the economy. This industry has created more than 210,325 jobs and also, 10% jobs are been increased from year 2016 to 2017. Due to this, there is increase in demand in coffee capsules and coffee beans which ultimately increasing interest in renting a coffee machine.
• UK coffee industry also ranks in top 5 in Europe’s consumer markets which almost consist of ¾ of total value of consuming coffee.
• UK also re- exports to various cities such as Sweden (8.5%), Germany (5.9%) and Ireland (47%) within Europe which has been increased to 11% in terms of value.
• Rise in non- specialists’ operators in UK caused segment growth by adoption of new technology. This has caused big challenge for operators who cannot afford adoption of such new technology.
Part 2: Business Performance Analysis
2.1 Statement of profit & Loss
It is a financial statement that sum ups the revenue, costs, and expenditure naturally acquired during a particular period of time. It is generally count as during a fiscal quarter or year. Further, it can be said that the profit and loss statement is one and the same with the income statement. These testimonies give information about a corporation’s incapability to generate income, decrease costs, or generate both (Ferreira, 2017). It gives various advantages to the company as such business is going on the right to increase the revenue or not. Moreover, it gives the clear understanding of the funds and performance of the business.

References
Acharya, U.K. and Pun, U., 2016. ANALYSIS OF NEPALESE COFFEE INDUSTRY: PRODUCTION AND POST-HARVEST ISSUES. An Official Journal of Nepal Horticulture Society, 11(1), p.66.
Ekpo, N.B., Etukafia, N. and Udofot, P.O., 2017. Finance manager and the finance function in business sustainability. International Journal of Business, Marketing and Management, 2(1), pp.31-38.
Fanea-Ivanovici, M., 2018. Crowdfunding—A Viable Alternative Source of Finance for the Film Industry. Rev. Econ, 70, pp.79-88.
Ferreira, J., 2017. Café nation? Exploring the growth of the UK café industry. Area, 49(1), pp.69-76.
Ghumro, I.A., Lashari, A.A., Bhatti, I. and Abro, M.U.R., 2019. Investment Decisions: How it influence Capital Budgeting Practices. Journal of Managerial Sciences, 13(2).
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Issah, O. and Ngmenipuo, I.M., 2015. An empirical study of the relationship between profitability ratios and market share prices of publicly traded banking financial institutions in Ghana.
Kajananthan, R. and Velnampy, T., 2018. Liquidity, Solvency and Profitability Analysis Using Cash Flow Ratios and Traditional Ratios: The Telecommunication Sector in Sri Lanka. Research Journal of Finance and Accounting, 5(23).
Kandilov, I.T., Leblebicioğlu, A. and Petkova, N., 2017. Cross-border mergers and acquisitions: The importance of local credit and source country finance. Journal of International Money and Finance, 70, pp.288-318.

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