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
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