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