Financial Decision Making

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Executive summary
The coffee industry is one of the fastest growing industry in the UK. In this decade, consumption of coffee increased at a fast pace and this creates an ample opportunity for the firms operating in this industry to grow their business at a rapid pace. Starbucks is one of the largest coffee chains in the US and to expand business it is considering acquisition of Roast Ltd. In this regard, in the report financial analysis and project evaluation is done. It is identified that firm is earning very low profit in its business. Cost is increasing at a rapid pace. However, to deal with this situation firm outsource its activities, but this is not sufficient. Liquidity condition is not good and inventory is taking the time to convert into cash. OCC is high which is due to mismanagement in the business. Project evaluation techniques also indicate that the project is not profitable. Hence, Starbucks must not acquire Roast Ltd.
Part 1: Industry review
Coffee industry is one of the largest industry of the UK. Below some of key points related to the UK coffee house industry is given below.
• In the UK largest share of the retail coffee is sold by supermarkets and hypermarkets. Hypermarket and supermarket cover 35% and 37% of coffee retailing.
• In the year 2017 regular instant coffee, observe total revenue of £810 million. It covers 54% of total turnover of entire coffee product revenue.
• Currently, demand of instant coffee decline in the UK market because of launching of wide varieties in the market like coffee pods, roast and ground, filtered coffee (Borrella, Mataix and Carrasco‐Gallego, 2015).
• GVA contribution of the coffee industry to the UK economy is ₤3.7 billion.
• For an average cup of coffee consumed in the UK, up to 76 per cent of its value is estimated to be produced in the UK.
• In the year 2008 as per available facts totally 70 million cups were consumed on a daily basis and in the year 2018 sharp plunge observed and demand increased to 90 million cups consumption on a daily basis.
• Key players in the UK coffee market are Costa coffee, Starbucks, Café Nero.
• Costa coffee is earning very higher amount of revenue then its rivals like Costa coffee, Starbucks and Café Nero.

Books and journals
Ahmad, M. F. and, 2017. Data envelopment analysis and Tobit analysis for firm efficiency in perspective of working capital management in manufacturing sector of Pakistan. International Journal of Economics and Financial Issues. 7(2). 706-713.
Alshatti, A. S. 2015. The effect of credit risk management on financial performance of the Jordanian commercial banks. Investment Management and Financial Innovations. 12(1). 338-345.
Borrella, I., Mataix, C.. and Carrasco‐Gallego, R. 2015. Smallholder farmers in the speciality coffee industry: opportunities, constraints and the businesses that are making it possible. IDS Bulletin. 46(3). 29-44.
Calderón, A.. and Ruiz, M. 2015. A systematic literature review on serious games evaluation: An application to software project management. Computers & Education. 87. 396-422.
Castro, G. F. and, 2016, November. Platform for project evaluation based on soft-computing techniques. In International Conference on Technologies and Innovation (pp. 226-240). Springer, Cham.
Cumming, D. J.. and Vismara, S. 2017. De-segmenting research in entrepreneurial finance. Venture Capital. 19(1-2). 17-27.

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