As the income statement shows the company should look

  • Liberty University
  • BUSI 690
  • Test Prep
  • hickchick44
  • 37
  • 96% (49) 47 out of 49 people found this document helpful

This preview shows page 22 - 24 out of 37 pages.

As the income statement shows, the company should look at decreasing their outsourcing by fifty percent each year. This would leave the company to make their own departments and units to handle the things they have been outsourcing. Maintenance Cost. The reason that maintenance cost would change is because the company, building more of their own means to survive on their own, and not outsource, will increase the cost of maintenance equipment and upkeep. The maintenance cost of the income statement without the strategy, will most likely vary a bit from year to year but most likely will stay about the same. With the strategy implemented, the maintenance cost will increase, because they will have to take care of and buy equipment to create their own means of not outsourcing. This means that the maintenance will increase drastically. Advertising Expenses. When a company is looking to increase their brand image and brand recognition, they will need to increase advertising. The first year the cost of adverting will be a large amount because of the cost of advertising for the first time. The company will have to figure out what advertising means is the best for them. This will mean spending money, in order to make money. When the strategy is not implemented, the company will most likely spend the same amount of money that they always have on advertising and brand recognition. De Beers should be able to rebuild its brand name within the next 3-5 years by investing roughly $70 million each year to increase brand recognition, this in turn will increase revenues by 25% each year. Salaries and Wages. The salaries and wages are very important to a company. The more employees that a company employs, the more this category will increase. When using the advised strategy, the salaries and wages will increase because more employees will be hired to
CASE STUDY 1 23 keep the company from outsourcing. When not implementing the strategy, the employee salaries and wages are most likely not going to change much because the company will not need to hire or fire employees. Balance Sheet The balance sheet shows that the company can take out a loan from the bank. This is where the money will come from, a loan from the bank. The balance sheet summarizes the company’s assets, liabilities, and shareholder’s equity (Rothaermel, 2013). The balance sheet for De Beers shows us that with the strategy the company has increased assets and without the strategy the company has decreasing assets. Statement of Cash Flows The statement of cash flows analyses the outflow and the inflow of the company. The cash flows of the company. With the strategy the bank may have to take out a loan to pay for the company to implement the needed changes in order to increase their profits. Without the strategy implementation. There would be no need for the loan, therefore the cash flows would be about the same for every year.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture