Lecture Marketing (12/e): Appendix B – Kerin, Hartley, Rudelius

Appendix B: Financial aspects of marketing. Basic concepts from accounting and finance provide valuable tools for marketing executives. This appendix describes an actual company’s use of accounting and financial concepts and illustrates how they assist the owner in making marketing decisions.

Copyright © 2015 McGraw­Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw­Hill Education THE CAPLOW COMPANY THE OPERATING STATEMENT  Picture Frame Retail Store  Understand How Accounting, Finance, and Marketing Relate to Each Other AppB­2 FIGURE B-1 The Caplow Company operating statement AppB­3 THE CAPLOW COMPANY THE OPERATING STATEMENT  Operating Statement (Income Statement or Profit-and-Loss Statement  Sales Elements • Gross Sales • Allowances • Returns • Net Sales AppB­4 THE CAPLOW COMPANY THE OPERATING STATEMENT  Cost Elements • Cost of Goods Sold  Inventory  Purchase Discounts  Direct Labor  Gross Margin (Gross Profit) AppB­5 THE CAPLOW COMPANY THE OPERATING STATEMENT  Cost Elements • Selling Expenses • Administrative Expenses • General Expenses  Profit Element AppB­6 THE CAPLOW COMPANY GENERAL OPERATING RATIOS  Expense-to-Sales Ratios AppB­7 FIGURE B-2 How to calculate various ratios useful in setting a price AppB­8 THE CAPLOW COMPANY PRICING RATIOS   Markup Markup $44 = × 100 = 122.2% Cost of Goods Sold $36 • Markup on Cost (%) = • Markup on Selling Price (%) = Markup $44 × 100 = ì 100 = 55% Selling Price $80 Markdown Markdown (%) = Markdowns $700 × 100 = × 100 = 0.875% Net Sales $80,000 AppB­9 THE CAPLOW COMPANY PRICING RATIOS  Stockturn Rate (Stockturns) • Stockturn Rate = = = Cost of Goods Sold Average Inventory at Cost ( Cost of goods sold  Beginning inventory + Ending inventory   ( $36,000  $6,000 + $5,000   )   )   = 6.5 Stockturns per Year AppB­10 THE CAPLOW COMPANY PRICING RATIOS  Return on Investment (ROI) • Return on Investment (ROI) = = Net Income × 100 Investment $5,400 × 100 $20,000 = 27% • Return on Investment (ROI) = Net Sales Net Income × Investment Net Sales = Investment Turnover × Profit Margin AppB­11 ... Retail Store  Understand How Accounting, Finance, and Marketing Relate to Each Other AppB­2 FIGURE B- 1 The Caplow Company operating statement AppB­3 THE CAPLOW COMPANY THE OPERATING STATEMENT  Operating...  Profit Element AppB­6 THE CAPLOW COMPANY GENERAL OPERATING RATIOS  Expense-to-Sales Ratios AppB­7 FIGURE B- 2 How to calculate various ratios useful in setting a price AppB­8 THE CAPLOW COMPANY... Net Sales AppB­4 THE CAPLOW COMPANY THE OPERATING STATEMENT  Cost Elements • Cost of Goods Sold  Inventory  Purchase Discounts  Direct Labor  Gross Margin (Gross Profit) AppB­5 THE CAPLOW