Marketing, Accounting, and Finance Essentials
Marketing Essentials
The 4 P’s of Marketing: Price, Place, Promotion. Making effective decisions about which “medium” to use to promote your product is essential. The decision will be influenced by:
- The target audience
- Size of the market
Types of Promotion
- Loyalty programs: Marketing efforts that reward a person for frequent purchases and the consumption of offerings.
- Coupons: A voucher entitling the holder to a discount off a particular product.
- Discounts: Deduction of the price of something.
- Mobile phone marketing: Multi-channel, digital marketing strategy aimed at reaching a target audience on their smartphones, tablets, and other devices.
- Press releases: Official statement issued to newspapers giving information on a particular matter.
- Sponsorship
- Product placement: A practice in which manufacturers of goods or providers of a service gain exposure for their products by paying for them to be featured in films and TV programs.
Market Segmentation
Identification of subsets of buyers within a market that share similar needs and demonstrate similar buyer behavior. Groups are separated by behavior, by demographics (age, income, gender, ethnicity, family size, occupation…), by geography, by psychographics (activities, interests, opinions, values, attitudes…)
Accounting Fundamentals
An listed company is a company that is registered and whose shares are sold on a stock market. In order to be listed, a company must be a public limited company (plc) in the UK and a corporation in the US.
What Does the Annual Report Contain?
- The balance sheet: Also called the statement of financial position, portrays the financial position of the company – what the company owns and what it owes – on a certain date.
- The profit and loss account: Also referred to as the income statement, reflects how well a company performed during the period presented and indicates whether the company’s operations have resulted in a profit or a loss.
- The cash flow statement.
Majority interest: If a company has a majority interest in other companies, the balance sheets and profit and loss accounts of the parent company and its subsidiaries are normally combined into consolidated accounts.
Key Financial Concepts
Revenues – expenses = net profit / net loss.
Fixed assets + current assets = total assets.
EBIT / Sales x 100 = Operating Profit Margin ratio.
EBIT = Earnings before interest/tax = operating profit. By dividing EBIT by sales and multiplying by 100, you can find what percentage of your revenues are profit.
Assets: Things that a company possesses that have value; they can be either sold or used by the company to make products or provide services that can be sold.
Current assets (CA): They represent the value of all assets that can reasonably expect to be converted into cash within one year. They are cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other liquid assets that can readily converted to cash.
Non-current assets (NCA) are assets which the company does not expect to convert to assets within one year or would take more than a year to sell. A fixed asset is bought for production or supply of goods or services, for rental to third parties, or for use in an organization.
A bailout plan means the company is rescued by the government.
Accrual accounting: Accrual accounting records expenses when they are incurred, not when they are paid.
Amortization VS. depreciation: They mean essentially the same thing: the reduction of the cost value of an asset over the estimated life of that asset. Amortization is used with reference to intangibles. Depreciation is used with reference to tangibles.
Bottom line: Revenues – expenses. If it is negative, we have a loss; if it is positive, we have a profit. You arrive at the bottom line by deducting income tax from EBT.