Impact Of Royalty Expenses On Revenue: A Case Study Of OZ Minerals

Conceptual Framework

Revenue is an income that any business has from their normal business activity, generally from sale of goods and services to the respective customers (Ciesielski & Weirich, 2015). Revenue often has a major impact due to the changes in royalty expenses. The royalty is a type of payment that is made by any one party to other, which owns a specific asset for an ongoing utilization of that asset (De Vaus, 2013). This royalty interest is the right for collecting a stream of royalty payments in future.

The aim of this research is to study the impact of revenues of a company due to change in royalty expenses. The company that is chosen for this research study is OZ Minerals. With royalty payment, it is meant that payments that are paid for some work is known as royalty payment. These expenses are done extra along with the initial fees that is paid to an organization or to an individual. The royalty fees are mainly given to franchisor for staying on the technological advances and creating fresh product in the market and providing fresh service in the market. Such factors that impact the revenues of because of royalty changes in OZ Minerals. There are some of the research question stated below that will address the research topic and evaluation of the research question will be described in the literature review of this research paper.

According to Ketefian (2015), revenue is also termed as sales and turnover. Most of the organizations receive revenue from royalties, interests or even other fee. This type of revenue refers to monetary unit that is earned during a specific period of time. For a non profit organization, the annual revenue is referred to as gross receipts and it involves donations from corporations and individuals and income from activities that are related to organizational mission (Prinsloo & Slade, 2013). It comprises of a major impact on the changes on royalty expenses.

As per Mayer et al. (2014), royalty expenses are payments of several kinds for the property owners to utilize that property. Some of the most significant and important advantages of royalty expenses are paying of no premium apart from energy flow sharing and requirement of no direct exposure to market. When there is an increase in sales, the royalty percentage would be increased to a greater amount. It is extremely vital and is available for the institutional investors.

According to Chikoto & Neely (2014), royalty payments are generally done in different types to the owners of some property so that they can use that property or that service. Royalties mainly deals with such payments for gaining rights for using the Intellectual property such as copyrights, trademarks or some patents.

The royalty payments that are recurrent are done effectively to contribute in an organization (Mayer et al., 2014). This particular type of payment are mainly used for maintaining all the system as well as ensuring that all the revenues goes on smoothly in between the franchisor as well as in franchisee.

Importance of Revenue

Zatta & Kolisch (2014) stated that the main cause of making the royalty fees is to access all the technological advances that are needed for the company. The royalty fees are also paid that enables to create as well as marketing all fresh services and products (Maillé, Simon & Tuffin, 2015). These payments are used for paying the expenses which incurred in the franchisors headquarter including utilities, employee’s compensation, as well as rent.

Pauwels, K., & Neslin (2015) stated that royalty expenses mainly enables a franchise company for extending the products and the services in other regions as well as in different other countries. With the innovation of more creative advertisements, the brands of the organization is becoming identifiable with high business as well as profits which are realized for the franchisor and the franchise.

According to Larkey (2015), royalty expense pays only benefits to its companies. The first and the foremost important and noteworthy benefit of these royalty expenses is that it subsequently allows ownership of the oil and gas production without undertaking any responsibility of daily operation. It even allows the business in paying no extra premium without the shares of energy flow (Corbin, Strauss & Strauss, 2014). Other specific advantages of royalty expenses involve owners are being provided with proper deduction of few of the significant taxes and some monthly income is paid to all the owners until when the wells are economic.

According to Maillé, Simon and Tuffin (2015), moreover, there is eventually no direct exposure of royalty expense needed for every capital market, which is to be associated with the publicly trading shares. This particular advantage allows the respective businesses in completing their trades independently without paying any extra cost. These are exclusive class assets, which are available to the several institutional investors. The attractiveness of the royalty investments is because that they generate the revenues of cash off and becomes prior to the operating responsibilities or the expenses which occur while managing the gas and the oil wells (Gemmell, Kneller & Sanz, 2013).

According to Crivelli & Gupta (2014), the royalty payments are basically paid to franchisor so that they can stay with the current technological expenses and also can create fresh as well as fresh products. The payments are used for paying the expenses received from headquarter of franchisors or paying rent, employee compensation, and utilities.

The royalty payments mainly enables a particular franchise company for extending the products as well as services on other regions and in other countries as well (Palsule-Desai, 2013). The organization are identifiable to increase its business as well as profits realized for franchisee and the franchisor. OZ Minerals has gained several advantages and impact on the revenue for the changes in royalty expenses. These types of royalty payments eventually enable specified franchise organization to extend products and services over several regions as well as in other countries.  

OZ Minerals have made royalty agreements for obtaining benefits under every circumstance (Marshall & Rossman, 2014). They have gained access to the products, which are much expensive and are extremely difficult in producing on its own. Since, they have made the agreement correctly, it had been a win-win situation for them. The amount of payments is being easily determined by this organization with the help of royalty expenses.

Royalty Expenses

Research Methods: The research methods that are will be used in this research paper is secondary method of data collection (Koro-Ljungberg, 2015). Secondary methods of data collection mainly includes summary, synthesis or collation of the research that is already in existence (Choy, 2014). For conduction secondary method of research, the existed documents and records are evaluated. This consists of examining the existed data that are available in the form of databases, reports, financial records, or from the newsletters. The secondary method of data collection is less expensive compared to other methods of data collection. There are two sources of secondary data collection methods. Internal source as well as external sources (Nayar & Stanley, 2014).

Internal sources mainly includes the data that are included inside the organization whereas the external data includes the data that are collected from other people or from other organization that are available externally. Internal sources also includes profit loss statements of the company and external sources includes media articles, professional associations or the government sources that are published for the company (Jamshed, 2014). For this research study, secondary sources of data collection is carried out with the internal as well as external sources of data that are available for Oz Minerals.

Data Analysis: Data Analysis is basically of two types, qualitative analysis as well as quantitative analysis. Qualitative secondary data analysis involves statistical data or numerical data that are available for the company related to the topic (Nadin & Stead, 2013). Qualitative secondary data analysis includes information about the research topic that are stated by different authors in various article sources. Both types of data analysis will be carried out with this research study (Nayar & Stanley, 2014). This will help to evaluate the available data that are collected for data analysis.

The main purpose of this research report is to study the impacts on the revenue structure because of the royalty expenses on the Oz Minerals. There are research questions that are defined in this research paper. The research questions that are addressed in this research paper are addressed in the literature review section of this research paper. Almost 20 research articles and journals are reviewed from different authors and researchers who has different views on the chosen topic. The validity of the research is stated in this research paper by reviewing all the articles that are considered for this research paper.

The time constraint and the budget constraint are also considered in the feasibility study of a research. A research includes time frame and a budget frame that is taken into consideration while defining the project or planning for the project. The time frame and the budget frame are to be considered while completing this particular research paper. The time that is fixed in the Gantt chart is to be followed while completing the research paper. The budget that is considered in the research paper is also to be followed by the researchers for carrying out this research paper.

References 

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Choy, L. T. (2014). The strengths and weaknesses of research methodology: Comparison and complimentary between qualitative and quantitative approaches. IOSR Journal of Humanities and Social Science, 19(4), 99-104.

Ciesielski, J. T., & Weirich, T. R. (2015). Revenue Recognition: How It Will Impact Three Key Sectors. Journal of Corporate Accounting & Finance, 26(3), 31-39.

Corbin, J., Strauss, A., & Strauss, A. L. (2014). Basics of qualitative research. sage.

Crivelli, E., & Gupta, S. (2014). Resource blessing, revenue curse? Domestic revenue effort in resource-rich countries. European Journal of Political Economy, 35, 88-101.

De Vaus, D. (2013). Surveys in social research. Routledge.

Gemmell, N., Kneller, R., & Sanz, I. (2013). Fiscal decentralization and economic growth: spending versus revenue decentralization. Economic Inquiry, 51(4), 1915-1931.

Jamshed, S. (2014). Qualitative research method-interviewing and observation. Journal of basic and clinical pharmacy, 5(4), 87.

Ketefian, S. (2015). Ethical considerations in research. Focus on vulnerable groups. Investigación y Educación en Enfermería, 33(1), 164-172.

Koro-Ljungberg, M. (2015). Reconceptualizing qualitative research: Methodologies without methodology. Sage Publications.

Larkey, P. D. (2015). Evaluating public programs: The impact of general revenue sharing on municipal government. Princeton University Press.

Maillé, P., Simon, G., & Tuffin, B. (2015, November). Impact of revenue-driven CDN on the competition among network operators. In Network and Service Management (CNSM), 2015 11th International Conference on (pp. 163-167). IEEE.

Marshall, C., & Rossman, G. B. (2014). Designing qualitative research. Sage publications.

Mayer, W. J., Wang, H. C., Egginton, J. F., & Flint, H. S. (2014). The impact of revenue diversification on expected revenue and volatility for nonprofit organizations. Nonprofit and Voluntary Sector Quarterly, 43(2), 374-392.

Nadin, V., & Stead, D. (2013). Opening up the compendium: An evaluation of international comparative planning research methodologies. European Planning Studies, 21(10), 1542-1561.

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Palsule-Desai, O. D. (2013). Supply chain coordination using revenue-dependent revenue sharing contracts. Omega, 41(4), 780-796.

Pauwels, K., & Neslin, S. A. (2015). Building with bricks and mortar: The revenue impact of opening physical stores in a multichannel environment. Journal of Retailing, 91(2), 182-197.

Prinsloo, P., & Slade, S. (2013, April). An evaluation of policy frameworks for addressing ethical considerations in learning analytics. In Proceedings of the Third International Conference on Learning Analytics and Knowledge (pp. 240-244). ACM.

Zatta, D., & Kolisch, R. (2014). Profit impact of revenue management in the process industry. Journal of Revenue and Pricing Management, 13(6), 483-507.

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