Brew Haven: Financial Analysis Report ACW1020 Assignment 2 Student Guide
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ACW1020 Assignment 2 Brief
| Unit Name | Accounting in Business |
| Unit Code | ACW1020 |
| Assignment Name | Financial Analysis report |
| Assignment Number/Reference | A2 |
Learning Outcomes
This assignment assesses the following learning outcomes:
| Learning Outcome Number | Learning Outcome Description |
| LO2 | Apply accounting principles and concepts in the interpretation of financial statements. |
| LO3 | Interpret information in financial statements, with a focus on assessing financial performance, financial position, liquidity, and key risk indicators of businesses to make informed decisions and recommendations for effective financial management. |
Weighting
This assignment is worth [40%] of your overall grade for this unit. Please see the assignment rubric at the end of this document for the weightings of each assessment criterion.
Requirements
This assignment has the following requirements:
| Assignment Type | Individual |
| Response Format | Report |
| Response Specifications | ● 1000 words with a 10% leeway. |
| Due Date | 18 September 2026, 11.55 p.m. |
| Submission Process
|
● Submit ONE PDF/Word files and name the file as “Student Name_ACW1020 A2 Report
● The file must be submitted via the Moodle submission box |
| Notes:
|
● Turnitin similarity should not exceed 15%.
● Penalties for late submission: 5% of the available marks in that task. A further penalty of 5% of the available marks will be applied for each additional day (24-hour period), or part thereof, the assessment task is overdue. Task submitted more than seven (7) days after the due date will not be marked. |
Assignment Task
Carefully study the following scenario related to a hypothetical company – Brew Haven Speciality Coffee
Brew Haven Specialty Coffee
Brew Haven Specialty Coffee is an independent café located near a university campus. Over the past four years, the business has built a loyal customer base by serving specialty coffee, handcrafted beverages and light meals. In addition to walk-in customers, Brew Haven has recently expanded its services by providing catering for university events and accepting orders through online food delivery platforms.
Demand for Brew Haven’s products has increased steadily throughout 2026. Encouraged by this growth, the Owner is considering opening a second café in a nearby commercial area. The proposed expansion would require an additional RM180,000 bank loan to finance renovation works, coffee equipment and initial operating costs.
The Owner has asked you, a Junior Business Consultant, to review the business’s financial performance before making the expansion decision. A staff member of Brew Haven has prepared the financial statements, but several transactions that occurred before 31 December 2026 have not yet been reflected in the draft Income Statement.
Your role is to determine Brew Haven’s actual financial performance by considering the additional information provided, analyse the business’s financial position using the adjusted financial information, and provide a recommendation on whether the proposed expansion should proceed.
Financial Information
The following information is provided:
- Draft Income Statement for the financial year ended 31 December 2026
- Cash Flow Summary for the financial year ended 31 December 2026
- Additional information relating to transactions that have not yet been reflected in the draft Income Statement
- Adjusted Statement of Financial Position as at 31 December 2026
Table 1 Draft Income Statement
For the Financial Year Ended 31 December 2026
| Item | RM |
| Sales Revenue | 960,000 |
| Cost of Goods Sold | (432,000) |
| Gross Profit | 528,000 |
| Wages Expense | (180,000) |
| Rent Expense | (72,000) |
| Utilities Expense | (20,000) |
| Insurance Expense | (24,000) |
| Marketing Expense | (18,000) |
| Delivery Platform Fees | (26,000) |
| Depreciation Expense | (16,000) |
| Operating Profit (EBIT) | 172,000 |
| Interest Expense | (12,000) |
| Draft Net Profit | 160,000 |
Table 2 Cash Flow Summary
For the Financial Year Ended 31 December 2026
| Cash Flows | RM |
| Net cash from operating activities | 180,000 |
| Net cash used in investing activities | (120,000) |
| Net cash from financing activities | 30,000 |
| Net Increase in Cash | 90,000 |
| Opening Cash Balance | 60,000 |
| Closing Cash Balance | 150,000 |
Additional Information
The following transactions occurred before 31 December 2026, but have not yet been reflected in the draft Income Statement.
1. Unrecorded Credit Sales
During the final week of December 2026, Brew Haven completed catering orders worth RM8,000. The food and beverages were delivered before 31 December 2026, but payment will only be received in January 2027. These sales have not yet been recorded.
2. Outstanding Wages
Employees worked additional shifts during the busy holiday period. Wages of RM10,000 relating to December 2026 have not yet been paid and recorded.
3. Prepaid Insurance
On 1 October 2026, Brew Haven paid RM24,000 for a 12-month insurance policy. The full amount has been recorded as Insurance Expense.
4. Depreciation
Depreciation expense for the year should be RM36,000, but only RM16,000 has been recorded.
Table 3 Adjusted Statement of Financial Position
As at 31 December 2026
This Statement of Financial Position has already been adjusted to reflect the additional information provided. Students are not required to prepare or adjust this statement. Use this statement together with your adjusted Income Statement from Task 1 when completing Tasks 2 and 3.
Assets
| Item | RM |
| Cash | 150,000 |
| Trade Receivables | 38,000 |
| Inventory | 60,000 |
| Prepaid Insurance | 18,000 |
| Equipment (Net) | 204,000 |
| Total Assets | 470,000 |
Liabilities and Owner’s Equity
| Item | RM |
| Trade Payables | 47,000 |
| Outstanding Wages | 10,000 |
| Bank Loan | 150,000 |
| Owner’s Equity | 263,000 |
| Total Liabilities and Owner’s Equity | 470,000 |
Your Tasks
Task 1: Determine Brew Haven’s Actual Profit
Using the draft Income Statement and the additional information provided:
1. Determine Brew Haven’s adjusted net profit for the financial year ended 31 December 2026 by applying the accrual accounting principle. For each adjustment, explain why it is required and show your calculations clearly, where applicable.
2. Compare and comment on the adjusted net profit with the draft net profit.
3. Evaluate whether the Owner’s view that the business performed well is supported after considering the additional information. In your discussion, explain how applying the accrual accounting principle provides a more accurate assessment of Brew Haven’s financial performance.
Task 2: Analyse Brew Haven’s Financial Performance and Financial Position
The company’s financial ratios for 2026 are provided below:
| No. | Ratio | Answer |
| 1 | Gross Profit Margin | 55.37% |
| 2 | Net Profit Margin | 16.12% |
| 3 | Current Ratio | 4.67 : 1 |
| 4 | Acid-Test Ratio | 3.30 : 1 |
| 5 | Inventory Turnover – Days | 47.3 days |
| 6 | Receivables Turnover – Days | 13.6 days |
| 7 | Interest Coverage Ratio | 14.0 times |
Using the adjusted Income Statement from Task 1, the adjusted Statement of Financial Position, the Cash Flow Summary, the financial ratios and the information provided in the business scenario:
1. Interpret what the ratios indicate about Brew Haven’s business, and support your analysis with relevant figures from the adjusted financial information and Cash Flow Summary. Present the analysis in point form, separated using suitable headings for profitability, liquidity, efficiency and solvency.
2. Evaluate how Brew Haven’s current financial position and cash flows may affect its ability to undertake the proposed expansion and take on the additional RM180,000 bank loan. Use the financial evidence to identify the key strengths and potential concerns of the business and explain their relevance to the proposed expansion.
Task 3: Recommendation to the Owner
The Owner plans to obtain an additional RM180,000 bank loan to finance the proposed second café.
1. Based on your analysis, recommend ONE of the following options:
Option A: Proceed with the expansion as planned.
Option B: Delay the expansion until the business’s financial performance improves.
Option C: Do not proceed with the expansion.
Justify your recommendation using evidence from the adjusted net profit, the adjusted Statement of Financial Position, the financial ratios, the Cash Flow Summary, and the business scenario.
2. Suggest TWO practical actions relating to Brew Haven’s profitability, liquidity, efficiency or financing that the business should implement over the next 12 months to support its chosen option. Your suggestions must address the financial strengths or concerns identified in Task 2 and be supported by the financial information.
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