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Financial Aspects of Marketing Management
Relevant Accounting Concepts <ul><li>Variable Costs </li></ul><ul><ul><li>Costs of Goods Sold </li></ul></ul><ul><ul><li>I...
Relevant Accounting Concepts <ul><li>Relevant Costs </li></ul><ul><ul><li>Expected Future Marketing Related </li></ul></ul...
Relevant Accounting Concepts <ul><li>Gross Margin </li></ul><ul><ul><li>Total Revenue - Total C.O.G.S. </li></ul></ul><ul>...
Relevant Accounting Concepts <ul><li>Trade Margin </li></ul><ul><ul><li>Each Level of Distribution Chain </li></ul></ul><u...
Contribution  Analysis <ul><li>Break Even Analysis </li></ul><ul><ul><li>Total Revenue = Total Variable Costs + Total Fixe...
Contribution  Analysis <ul><li>Sensitivity Analysis </li></ul><ul><ul><li>Contribution Margin Has Many Applications </li><...
Contribution  Analysis <ul><li>Contribution Analysis & Market Size </li></ul><ul><ul><li>Variety of Contribution Analysis ...
Contribution  Analysis <ul><li>Contribution Analysis & Performance Measurement </li></ul><ul><ul><li>Evaluate Each Product...
Contribution  Analysis <ul><li>Cannibalization Assessment </li></ul><ul><ul><li>New Products May Attract Existing Product’...
Financial Concepts <ul><li>Liquidity </li></ul><ul><ul><li>Meet Short Time Financial Obligations </li></ul></ul><ul><ul><l...
Financial Concepts <ul><li>Pro-Forma Income Statements </li></ul><ul><ul><li>Anticipated Revenues vs. Related Costs </li><...
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Financial aspects

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Transcript of "Financial aspects"

  1. 1. Financial Aspects of Marketing Management
  2. 2. Relevant Accounting Concepts <ul><li>Variable Costs </li></ul><ul><ul><li>Costs of Goods Sold </li></ul></ul><ul><ul><li>Indirect Variable Costs </li></ul></ul><ul><li>Fixed Costs </li></ul><ul><ul><li>Programmed Costs </li></ul></ul><ul><ul><li>Committed Costs </li></ul></ul>
  3. 3. Relevant Accounting Concepts <ul><li>Relevant Costs </li></ul><ul><ul><li>Expected Future Marketing Related </li></ul></ul><ul><ul><li>Vary According to Alternative Chosen </li></ul></ul><ul><li>Sunk Costs </li></ul><ul><ul><li>Past Expenditures Irrelevant to Future Planning </li></ul></ul><ul><ul><ul><li>Research & Development </li></ul></ul></ul><ul><ul><ul><li>Previous Advertising Expenditures </li></ul></ul></ul><ul><ul><li>Sunk Cost Fallacy </li></ul></ul>
  4. 4. Relevant Accounting Concepts <ul><li>Gross Margin </li></ul><ul><ul><li>Total Revenue - Total C.O.G.S. </li></ul></ul><ul><ul><li>Unit Selling Price - Unit C.O.G.S. </li></ul></ul><ul><ul><li>Expressed as Dollars or Percentage </li></ul></ul><ul><ul><li>Can Be Impacted by a Change in: </li></ul></ul><ul><ul><ul><li>Volume </li></ul></ul></ul><ul><ul><ul><li>C.O.G.S. </li></ul></ul></ul><ul><ul><ul><li>Selling Price </li></ul></ul></ul><ul><ul><ul><li>Mix of Products Sold </li></ul></ul></ul>
  5. 5. Relevant Accounting Concepts <ul><li>Trade Margin </li></ul><ul><ul><li>Each Level of Distribution Chain </li></ul></ul><ul><ul><li>“ Markup or Mark-On” </li></ul></ul><ul><ul><li>Usually Determined on Selling Price </li></ul></ul><ul><li>Net Profit Margin </li></ul><ul><ul><li>Sales Revenue less: </li></ul></ul><ul><ul><ul><li>C.O.G.S. </li></ul></ul></ul><ul><ul><ul><li>Other Variable Costs </li></ul></ul></ul><ul><ul><ul><li>Fixed Costs </li></ul></ul></ul><ul><ul><li>Equal Net Profit Margin (Before Taxes) </li></ul></ul>
  6. 6. Contribution Analysis <ul><li>Break Even Analysis </li></ul><ul><ul><li>Total Revenue = Total Variable Costs + Total Fixed Costs </li></ul></ul><ul><ul><li>Unit Break Even = Total $ Fixed Costs / Unit Selling Price - Unit Variable Costs </li></ul></ul><ul><ul><li>Contribution Margin = Unit Selling Price - Unit Variable Cost/Unit Selling Price </li></ul></ul>
  7. 7. Contribution Analysis <ul><li>Sensitivity Analysis </li></ul><ul><ul><li>Contribution Margin Has Many Applications </li></ul></ul><ul><ul><li>Vary Each Element to Look at Alternative Strategies </li></ul></ul>
  8. 8. Contribution Analysis <ul><li>Contribution Analysis & Market Size </li></ul><ul><ul><li>Variety of Contribution Analysis Choices </li></ul></ul><ul><ul><li>Market is Smaller than Desired Sales </li></ul></ul><ul><li>Contribution Analysis & Profit Impact </li></ul><ul><ul><li>Break-even Not Enough </li></ul></ul><ul><ul><li>Businesses Make Profit to Survive </li></ul></ul><ul><ul><li>Unit Volume to Achieve Profit Goal = Total $ Fixed Cost + $ Profit Goal / Contribution per Unit </li></ul></ul>
  9. 9. Contribution Analysis <ul><li>Contribution Analysis & Performance Measurement </li></ul><ul><ul><li>Evaluate Each Product in Mix </li></ul></ul><ul><ul><li>Managers Should Evaluate Each Element: </li></ul></ul><ul><ul><ul><li>Unit Price </li></ul></ul></ul><ul><ul><ul><li>Sales Volume </li></ul></ul></ul><ul><ul><ul><li>Unit Variable Costs </li></ul></ul></ul><ul><ul><ul><li>Total Variable Costs </li></ul></ul></ul><ul><ul><ul><li>Unit Contribution </li></ul></ul></ul><ul><ul><ul><li>Total Contribution </li></ul></ul></ul><ul><ul><ul><li>Net Profit </li></ul></ul></ul>
  10. 10. Contribution Analysis <ul><li>Cannibalization Assessment </li></ul><ul><ul><li>New Products May Attract Existing Product’s Customers </li></ul></ul><ul><ul><li>Determine the Financial Impact of New Product on Existing Products </li></ul></ul>
  11. 11. Financial Concepts <ul><li>Liquidity </li></ul><ul><ul><li>Meet Short Time Financial Obligations </li></ul></ul><ul><ul><li>Working Capital = Current Assets - Current Liabilities </li></ul></ul><ul><li>Operating Leverage </li></ul><ul><ul><li>Relationship of Fixed to Variable Costs </li></ul></ul><ul><ul><li>Hi-leverage: airlines/heavy equipment </li></ul></ul><ul><ul><li>Low-leverage: wholesalers internet retailers </li></ul></ul>
  12. 12. Financial Concepts <ul><li>Pro-Forma Income Statements </li></ul><ul><ul><li>Anticipated Revenues vs. Related Costs </li></ul></ul><ul><ul><li>Based on Managers Strategic Scenarios </li></ul></ul>

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