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Factors that Makeup Prices
Analyzing Revenues, Costs, & Expenses
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What is Price? Price is the value of money placed on a good or service. -Important factor that helps establish and maintain a firm’s image, competitive edge, and profits.
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Factors that must be addressed in a price
Cost of Goods – Amount to purchase or produce goods to be sold Overhead Expenses – Costs of operating a business. Profit – Amount of money left over after costs and expenses are paid.
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Revenue Any money that is generated and flows into a business.
Most money in a business is generated through sales revenue Price determines how much sales revenue is generated
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Examples of Non-Sales Revenues in Sports Marketing
Sponsorship Revenues Licensing Revenues Interest Earned
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Costs & Expenses Any money paid by a company to operate and maintain the business. Dollars that flow out of a business
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Basic Business Formula
Revenue – Costs & Expenses = Net Profit or Loss
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Income Statement A financial statement that lists a company’s revenue & expenses to determine net profit or loss over a period of time. (Referred to as a company’s bottom line)
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Break-even Point Revenue = Costs & Expenses
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Markup or Margin The amount of profit added to costs or breakeven point. Price – Costs(B.E.P) = Markup(profit)
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Markup is usually expressed as a percentage.
Basic Pricing Formula Costs + Markup = Price Markup is usually expressed as a percentage.
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Other factors Affecting Price
Competition Quality/Image Supply & Demand Channels of Distribution Promotional Discounts Seasonal Discounts
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The Main Goal of all Businesses
Revenue > Costs & Expenses
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