Financial outcomes paper

Struck Japan it already did not own for $914 million” (Derrick, 2014, Para 2). Struck acceptance of this offer can result in three potential financial outcomes; increased revenue from sales, changes in cost of goods sold, and changes in expenses. Based on Stardust’s historical annual growth trends in the China/Asia markets, the most likely financial outcome of Stardust’s transition to full ownership sis 15% increase in revenues. This may or may not be accompanied by with the most likely scenario of a 5% decrease in their cost of goods sold, and a 5% decrease in their expenses. Scenario Analysis

Scenario analysis is about understanding what can happen when things change within a firm. Analysis will assist Struck in understanding how their buy out of their Struck Japan partnership can affect their business overall, and assist them with understanding the financial risks involved in their venture. Standard deviation of past results can assist to construct an idea of what will happen in the future, however when taking on a brand new venture unforeseen obstacles may appear. Analyzing Struck’ revenue from years 201 1 through 2014, it is discovered that the standard deviation is . 45, and that the deviation in their growth percentages over the same time frame is 1. 907. These are good signs that Struck is doing well as they continue to develop new products and expand across the globe, as the standard deviation figures reflect an increase in revenue growth. Typically, scenario analysis is based on three ratings, worst-case scenario, most likely, and best-case scenario. Although it is important to understand and define other possible scenarios, improbable events should not be used because they would not result in an accurate analysis.

By using extreme scenarios, such as the worst and best-case scenarios, which show the most negative and most positive, respective results, companies such as Struck can test their theories and mitigate any potential risks that they may encounter. Revenue Revenue analysis will help Struck understand one of the key variables that affects their business performance. Comparing current sales to previous periods provides Struck of a quick understanding of how their business is trending.

Struck has seen continued growth year over year since 2011, and this positive trend provides them with insight into how well their traceries are performing. New strategies, such as growth into Japan, can be made with confidence when the business is trending positively, and previous expansions have been well received. One of the fastest growing investments for Struck is China/Asia Pacific. ” Struck expects to see 16 percent to 18 percent revenue growth during fiscal 2015. Excluding the Japan impact, revenue growth is expected to be consistent with the company’s previous target of 10 percent plus revenue growth” (Derrick, 2014, Para 5).

The financial effect of increases or decreases in revenue from sales is substantial, specially considering the high volume of transactions Struck completes internationally on a daily basis. The most likely scenario for sales growth with Struck Japan buy out is 15%. The figure is based on the growth rate of Struck since 201 1, which averages at 14%. A 15% increase in sales, With cost of goods sold and expenses constant, will result in over 1. 5 billion dollars in income for 201 5, an increase of over 30% from the previous year.

The best-case scenario would result in a 20% increase in sales, and nearly 60% increase in income. In the worst-case event that Struck sales drop 5%, the many would still realize a profit. Although a decrease in revenue is unlikely considering Struck continued growth, it is a possibility as political and socio-economic changes occur around the globe. Cost of goods sold The cost of goods sold is associated with the cost of any raw materials used to produce and market Struck coffee, but does not include any indirect expenses.

The cost of goods sold is an important part of a business With full control over Struck Japan, Struck may be able to implement a number of initiatives that would work towards reducing their cost of goods sold, such as better quality control, more effective product assortment, and reduced waste. A 5% crease in will result in a nearly 1. 2 billion decrease in cost of goods sold, which will positively affect the company’s gross income. A decrease in cost of goods sold may also be a challenge, depending on how Scabby has conducted their half of the business in the past.

The China and Asia Pacific region of the world operates much differently than its Western counterparts, and Struck may face ethical business challenges, as it is unknown as to how Scabby partnered with suppliers and other vendors. Struck may see costs rise if they are unable to store, ship, and promote their product as effectively s they had when in partnership. Expenses Expenses normally react to relative changes in sales, however with Struck vast distribution channels and vendor relationships, they may be able to lower their expenses even as they expand to new regions such as Japan.

Variable expenses, such as fees such as transportation, and credit card commission fees will increase as new stores pop up and consumer purchasing increases. Fixed expenses, such as employee salaries, benefits, property and income taxes, and utility costs will also increase as Struck expands, however, since they are buying out existing locations and not looking to build new ones, these expenses may not vary greatly from the previous year. Expenses such as income tax may play a significant role in Struck income as they gain more stores in Japan and the China/Asia Pacific region.

Analysis has suggested that changes could be in the range of 15%, considering increases and decreases in expenses, with a Worst-case scenario of expenses increasing by 5%, to the most optimistic scenario of a 10% decrease. Expenses will primarily come in the form of costs to improve UAPITA, taxes, and payroll. A consideration that is not taken into account for the most likely and optimistic scenarios is that customary increase in revenue that normally accompanies and increase in expenses.

Expenses such as payroll and capital improvements can be associated with company expansion and the need for more employees, assuming that expansion is a result of consumer wants and needs, which will then increase revenue. Conclusion Struck over the years have proved themselves to be an organization that thrives year after year. Just in the last decade their revenue has increased by almost 150% (Mornings, 2015). Their passion to bring a connection to everyone they see and do business with has made them into the largest roaster and retailer of specialty coffee the world has ever known. Struck, which opened its first store outside of North America in Toss’s Gina district nearly 20 years ago, said it expects the deal to immediately add to its results, excluding certain items. The transactions are expected to be fully completed in the first half of calendar 2015″ (Beckmann, 2014, par a. 6). Its expanded investment with China/ Pacific-Asia and the acquisition of Struck Japan will also prove to be a success because not only do they want to expand their business, but more importantly they want to do it the right way to fulfill their mission in helping the world become a little better one neighborhood at a time.