mf session 1
TRANSCRIPT
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Marketing Finance
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Marketing
An Overview
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Definition
Marketing is the process of discovering andtranslating consumer needs and wants into product
and service specifications creating demand for theseproducts and services and then in turn expandingthis demand.
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Market
Market means a particular location where buyersand sellers meet and transact purchases and sales
Types of market- Consumer goods market
- Industrial goods market
- Service market
- Social market
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Components of Marketing
Market segmentation
Product positioning
Marketing Mix
- product
- price
- place
- promotion
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Finance- An Overview
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Financial Accounting
Cost Accounting
Management Accounting
Financial Management
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FinancialAccounting
CostAccounting
ManagementAccounting
Need External- law audit,society
Internal- costfinding, costcontrolproductivity
Internal- profitability,improvement inefficiency and overallperformance
Responsibility Watchdog ofshareholders
Watchdog ofmanagement
Watchdog ofmanagement esplower and middle level
Effectiveness Control throughbudgets
Control bysetting standardsand operatingcost control
Challenging thevarious standards ofproductivity
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Marketing finance interdependence
Product planning including product selection, retention and abandonment as well
as dilution in product portfolio
Product pricing including both short range and long range pricing policies and
strategies
Evaluation of marketing performance both general and specific marketing
functions like product profitability analysis
Functional cost analysis to achieve cost effectiveness and also for exercising a
systematic and meaningful control over marketing cost and expenses.
Introduction and operation of an effective budgetary Control system in marketing
Control of marketing operations- both the employment of fund and cost of inputs
Marketing investment decision including monitoring their implementation.
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Essential financial concepts used in marketing
1. Direct material + direct labour + direct otherexpenses = prime cost
+ Factory overheads
= factory or Works cost+ office & Administrative overhead
= cost of production
+ selling & distribution overhead= cost of goods sold/cost of sales
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Factory overhead Office &administrativeoverhead
Selling & distributionoverhead
Indirect material
Loose toolsRent
Power & fuel
Repair and maintenance
DepreciationWorks manager salaries
Rent & rates
SalariesTelephone & postage
Printing & stationery
Legal expenses
Audit fees
Showroom rent & rates
Salesman salariesCommissions
Travelling expenses of
salesman
AdvertisingSample & free gifts
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Sales
COGS = net profit interest
= profit before tax
tax
= profit after tax
preference dividend
= earnings available to equity shareholders / totalno of shares outstanding
= earning per share (EPS)
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Break even Analysis
It is that point where we have no profit / loss
Total Revenue = Total Cost
SP * Q = Fixed Cost + total variable cost
SP * Q = Fixed Cost + VC*Q
SP * Q VC*Q = Fixed Cost
break even quantity = FC/(SP-VC)
break even sales = FC * SP/(SP-VC)
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Break even point for a fixed cost investment
Break even analysis for price cut
Break even analysis for variable cost
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CAGR = compounded annual growth rate = year toyear growth rate
Return on investment (ROI) = net profit aftertax/investments
Return on capital employed = net profit aftertax/total capital employed
Return on sales = net profit after tax/sales
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Market based Management&
Financial Performance
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Cost Metrics average cost per unit
Marketing & sales expensesOperating expenses
Productivity metricsInventory turnoverSales per employee
Days of accounts receivable
Profitability Metrics Return on salesReturn on assets
Return on invested capital
Market MetricsMarket growth rate
Market shareMarket demand to potential
Competitiveness metrics relative product qualityRelative service qualityRelative price and value
Customer Metrics Customer SatisfactionCustomer retentionCustomer loyalty
Financial Performance Metrics Vs Marketing Performance Metrics
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Marketing Strategies & Profitability
Net profit = Revenue
Expenses= quantity sold * Selling price per unit Cost of goods sold
operating expenses
Customer Margin = Revenue per customer variable cost per customer
Total Contribution = Customer Volume * Customer Margin
Net marketing contribution = Total contribution market expenses
Net marketing contribution = Sales Revenue * % Gross Margin Marketing &Sales Expense
Net profit (before taxes) = Net marketing contribution operating expenses
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Market ROI = Net marketing Contribution/Marketing &sales expense * 100
Marketing ROS = Net marketing Contribution/ salesRevenue * 100
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Marketing Strategies & Assets
Investment in Accounts Receivable
accounts receivable = Sales Revenue * percent days outstanding
accounts receivable = Customer Volume* Revenue per customer* percent days outstanding
Investment in inventory
Inventory investment = total cost of inventory * percent days ofinventory
Inventory investment = customer volume * unit cost per customer* percent days of inventory
Fixed Assets