mf session 1

7/31/2019 Mf Session 1

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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

mf session 1

Documents