Project Report Of Coffee Shop Business

Business Overview

Discuss about the Project Report of Coffee Shop Business.

This report explains about a business of cafe named by “Coffee Shop”. In this report, the business products services, legal structure of the business, various financing options which could be used by the business, role of accounting, tools of financial statement analysis, PPE evaluation, current liabilities and current assets, important financial items of the company etc has been evaluated. The business plan has been prepared to evaluate all the accounting related factor of an organization. 

“Coffee Shop” is a coffee cafe. It would be placed at Sydney in Australia. The main products of the business are different types of coffee such as Latte, Espresso, Americano, cappuccino, macchiato etc. the coffee would be sold by the business into 3 different packs which are small, large and medium. The cafe would be situated near the high street of Sydney and it would offer a great ambiance to the customers to come, sit and enjoy the different varieties of the business. The business would be run as a partnership business. James, Coles and Amelia would register the business under the partnership act. The firm would be a retailing business and the will manufacture the coffee and sell it to its customers (Hopp and Greene, 2018).           

The size of the business would be small. The business would run the activities under the food and hospitality industry. The main strategy of the business is to evaluate and enhance the marketing and promotions of the different coffees of the business and make new policies to enhance the number of outlets in next 5 years.

The business would be a partnership business. 3 people, James, Coles and Amelia would start the business and will register the business as a partnership business under the partnership act (Higgins, 2012). The partners would have limited liability in the business as well as the profit and loss sharing percentage of the customers would also be same. However, they have agreed in the contract that if any partners want to do a business outside as well in different industry than he or she could do with the consent of other partners.

In case of financing for the “coffee shop”, partners have only few options to raise the funds from. Partners could contribute their own money as the firm’s capital for running the business or they could take the loan from any financial institute or they could raise the money from any relatives. For the “coffee shop”, partners would require to manage $ 6,000 to start the business and run the activities of the business smoothly. These funds would be managed by the partners through contributing their own money and through raising some funds from the long term bank loan (Gibbson, 2011).

Legal Structure

On the basis of the business plan evaluation, it has been recognized that the following are the sources through which the company could raise the funds:                     

The bank loan would be taken for the 5 years on the interest rate of 12% and would be paid back by the company after 5 years in EMI. In case of “Coffee Shop” market securities are not the option to generate the business. The partnership sources have been chosen for the less costly funds and the bank funds have been chosen due to less risky option.

Accounting process is quite crucial for the business of “Coffee Shop”. This process is used by the businesses to manage all the related information about the accounting and financial transaction of the business. Strong accounting system helps a business to maintain the better capital structure, maintain the better policies about the accounting system, accounting controls and lack of cash reserves (Madhura, 2011).

Accounting process in “Coffee Shop” would make it easier for the business to manage the entire financial transaction of the business so that a better auditing could be done and it could be recognized that what are the lacking points of the company and how could the performance of the company be better.  It also recognizes the factors on the basis of what new strategies could be prepared for the sustainability of the business. The main user of the accounting information is internal and external stakeholders of the company who evaluates the information and make decisions about the performance and the changes of the business.          

Financial statement analysis is process which makes it easier for the business to evaluate that how the company is performing in terms of its financial performance. Analyzing the financial statement of an organization is crucial for the business “Coffee Shop”. It would make it easier for the company to make better decision about the position of the company.

Financial statement analysis are of various types and used by the companies according to their decision process. In case of “Coffee Shop”, it has been found that the ratio analysis process should be used by the company to evaluate the accounting process and the financial performance and the position of the company. The ratios of the business could be compared with the competitive company to evaluate the area where the performance of the business is bad (Finch, 2016). Ratio analysis study could be performed on the basis of main financial statement items of the business.

Different Financial Options

The property, plant and equipment used in the business are as follows:

(Brooks, 2015)

The depreciation method for each of the property, plant and equipment is different. The depreciation method has been stated above. The depreciation methods have been followed according to the industry.

Unearned revenue and prepaid expenses are the current assets of the business. In Coffee Shop, the unearned revenue could be a huge amount from the corporate where the business is supplying the coffee and the prepaid expenses could be the rent amount which has been paid by the company in advance (Brown, 2012).

There are various financial items, ratios and the process of the business which would be evaluated by the bank while sanction the loan amount. Some of them are as follows:

(Boiko, 2016)

In case of coffee shop, the profit which would be generated by the business will be divided equal to the partners according to the partnership act. But, the partners have decided to retain the 50% of profit for the further investment. And the balance amount will be distributed them in equal parts (Brinckmann and Kim, 2015).

Following is the cash flow statement of the company of a year:

It explains that the cash flow from operating activities of the business would include the cash sales, debtors’ amount and the total expenses of the company which would be $ 5500. Further, the cash flow from investing activities would brief about the sales of purchase and equipments, matured investments, purchase of property and equipment and purchase of investments of the company (Brigham and Daves, 2012). Lastly, the cash flow from financing activities brief about the cash received from the partners and the bank loan of the company. On the basis of cash flow from operating activities, investing activities and the financing activities it has been found that that the free cash flow of the company is $ 7000. It explains about the better position and the performance of the company in the market.

Conclusion

The above study explains that the “Coffee Shop” would run the business smoothly in the market. It explains that the accounting activities of the business would assist the business to manage the better performance in the market.

References:

Boiko, V.I., 2016. Methods of designing and implementing a business plan in the cultural sector of the regions of the country. In perspective directions of scientific researches(pp. 169-172).

Brigham, E. and Daves, P., 2012. Intermediate financial management. Nelson Education.

Brinckmann, J. and Kim, S.M., 2015. Why we plan: the impact of nascent entrepreneurs’ cognitive characteristics and human capital on business planning. Strategic entrepreneurship journal, 9(2), pp.153-166.

Brooks, R., 2015. Financial management: core concepts. Pearson.

Brown, R., 2012. Analysis of investments & management of portfolios. Pearson Higher Ed.

Finch, B., 2016. How to write a business plan. Kogan Page Publishers.

Gibson, C.H., 2011. Financial reporting and analysis. South-Western Cengage Learning.

Higgins, R.C., 2012. Analysis for financial management. McGraw-Hill/Irwin.

Hopp, C. and Greene, F.J., 2018. In Pursuit of Time: Business Plan Sequencing, Duration and Intraentrainment Effects on New Venture Viability. Journal of Management Studies, 55(2), pp.320-351.

Madura, J., 2011. International financial management. Cengage Learning.

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