Financial analysis Group 3 Fyeeovoye Hendrina Wilhelmina

Presentation outline Introduction Types of costs Profit maximization Types of ratios Acknowledgments

Types of costs Fixed costs Variable costs Total costs

Profit Maximization A method of setting prices that occurs when marginal revenue equals marginal cost. Profit maximization occurs when marginal revenue equals marginal cost.

Break-even Where total costs equals to total revenue. Where the business in loss nor profit Fixed costs are covered by contribution

Importance of break Even Break-even analysis provides a quick estimate of how much the firm must sell to break even and how much profit can be earned if a higher sales volume is obtained.

Profit impact on marketing strategies If marketing strategies do not contribute positively to profitability, then to maintain or improve profits, a business must cut expenses. The only source of positive cash flow in any business comes from customers; all the rest is expense.

Strategies to increase market share or grow revenue Working with familiar customers and channels is always an advantage. It is more cost-efficient and customer-effective to stay close to what you know – current customers.

Share leaders have to work harder than share followers to protect their shares Successful (high-profit) share followers have a stronger product position with respect to relative product quality, and devote more to marketing effort. They also put more resources into R&D and are better managers of production capacity. The combined effect of these performance characteristics is a slightly higher share and much higher profits.

Marketing Mix Metrics Advertising Promotion Distribution Price Sales force Customer service

Different ratio Liquidity Ratios Current ratio = current assets :current liabilities

Cont.… Productivity Ratios Space productivity = net sales / square foot of selling space

Acknowledgements Thank you for your time and participation

1 What is break even? 2 Mention two types costs in a business? 3 What is the importance of break even? 4 Give one example of a ratio?