Sales Management Marketing Financial Analysis Review - Topic 6

What Accounting Does & Does Not Teach Cash Flows Are Essential for Sales Managers Remember the Marketing Concept

Profit Equation Profits = Revenues – Costs Revenues = Price * Quantity Sold Costs = (unit cost * unit sold) + fixed costs Sales Costs can be variable, fixed, or single lump sum

Breakeven Breakeven = Fixed Costs / Unit Contribution Unit Contribution = Unit Price – Unit Cost

Breakeven 2 But we usually want to make at least as much money as before. So…. Breakeven = (Past Profit + Fixed Costs) / UC Or Breakeven = (Target Profit + FC) / Unit Cont.

Total Contribution Total Contribution (or total dollar contribution) = total direct revenues – total direct costs This is harder to determine than you expect Essential to what marketers do, can control, and what their expectations are

Joe the Salesperson Example

Contribution Reminder Unit Contribution is not Total Contribution Be sure to use all of this terminology correctly MONEY IS SERIOUS!

Relevant Costs Sunk Costs Relevant Cost Fallacy

Risk is Relative

Income Statement Review Look at example in notes

Balance Sheet Example Look at note example

Companies Keep Multiple Sets of Books

Profit Does Not Equal Cash Profit is an Opinion Cash is a Reality