Financial Decision Making (Sample-3)

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Executive Summary:

Coffee industry in the UK is having great opportunities for companies to expand their business in order to gain market share and profits. Companies should take advantage of opportunities present in the UK.
Also, the UK coffee industry is facing problems of labor shortage and rising of non- specialists, operators which is mainly a problem for small scale coffee shops.

Roast Ltd Financial position is very poor and liquidity and profitability ratios of the company are lower which clearly depicts mismanagement of company to handle revenue and expenses in their business.
The company’s decision of not paying dividend in year 2018 is very good because Roast Ltd is not earning enough profits in year 2017 so that pay as dividend to their shareholders.

Roast Ltd should accept the project because according to three investment appraisal techniques, project will be increasing the company’s profits, which will help maximizing financial condition of the company.
The company is also having various sources of finance by which it can expand its operations by selecting equity because this will decrease company’s fixed expenses and hence will help in maximizing its profits.
Starbucks should not adopt Roast Ltd because the financial situation of the firm is very poor and also there is mismanagement in the company.

 

Industry Review:

UK is the largest nation worldwide where people are shifting from tea to coffee lovers. It can be observed because in the year 2008, 70 million cups daily coffee consumption was there, but in the year 2019, 95 million daily cup of coffee are being consumed and slowly this demand is shifting towards specialty.
In UK, London has become the heart of coffee consumption because even at the time of Brexit crisis, industry observed the profit of 12% in year 2018 and expecting 5% CAGR for coming next 5 years. It is the 5th largest country in the European market for coffee consumption. Moreover, up till now in the UK there is consumption of 2.9 kg per person average consumption, which is lower than average consumption of 7 to 8 kg per person (Ferreira, and Ferreira, 2018).

In year 2019, 1400 specialty coffee shops were present in the UK & now it is expected to grow up to 2500 coffee shops in year 2020. Specialty coffee consumption is being increased in the current year by 10% and constantly it will be grown by 13% annually (Trends in UK Coffee market in 2019).

Main coffee chain shops in the UK coffee industry are Costa, Starbucks, Caffe Nero and Cafe2U. Costa is the biggest player in the UK having 2625 outlets and Starbucks is having 995 outlets in the UK (Coffee industry in UK, 2020). Total annual turnover collectively in year 2018 is £4.3 billion, including Costa (£113 million), Starbucks (£387.6 million) and Caffe Nero (£334.4 million).

 

 

 

References:

Books and Journals:

Abuseif, M. and Gou, Z., 2018. A review of roofing methods: Construction features, heat reduction, payback period and climatic responsiveness. Energies. 11(11). p.3196.
Ali, K.G. and Hemmatfar, M., 2018. Investigation the relationship between changes of profit and loss statement items and value-added changes in companies listed in Tehran Stock Exchange.
Amornkitvikai, Y. and Harvie, C., 2018. Sources of finance and export performance: Evidence from Thai manufacturing SMEs. The Singapore Economic Review. 63(01). pp.83-109.
Balaban, M., Župljanin, S. and Ivanović, P., 2016. Sources of Finance for Entrepreneurship Development. Economic Analysis. 49(1-2). pp.48-58.
Bergstresser, D., Desai, M. and Rauh, J., 2006. Earnings manipulation, pension assumptions, and managerial investment decisions. The Quarterly Journal of Economics. 121(1). pp.157-195.
Connolly, E. and Jackman, B., 2017. The Availability of Business Finance. RBA Bulletin, December. pp.55-66.
Ferreira, J. and Ferreira, C., 2018. Challenges and opportunities of new retail horizons in emerging markets: The case of a rising coffee culture in China. Business Horizons. 61(5). pp.783-796.
Franklin, M., Graybeal, P. and Cooper, D., 2018. Describe the Income Statement, Statement of Owner’s Equity, Balance Sheet, and Statement of Cash Flows, and How They Interrelate. Principles of Accounting, Volume 1: Financial Accounting.
Hopkinson, M., 2017. Net Present value and risk modelling for projects. Routledge.average rate of return
Leyman, P. and Vanhoucke, M., 2017. Capital-and resource-constrained project scheduling with net present value optimization. European Journal of Operational Research. 256(3). pp.757-776.

 

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