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Basic Finance For Marketers
The marketing financial analysis circle
Financial analysis can be used to serve many purposes in an organisation but in the area
of marketing it has four main functions:
a) to gauge how well marketing strategy is working (situation analysis)
b) to evaluate marketing decision alternatives
c) to develop plans for the future
d) to control activities on a short term or-day to-day basis.
In effect these four functions comprise what can be called the "Marketing Financial
Analysis Circle" (see figure 1.1)
Figure 1.1 The marketing-financial analysis circle
Activities associated with marketing financial analysis functions
For each of the four functional areas where financial analysis is useful in marketing, there
are a number of associated activities viz:
a) Financial situation analysis (how well marketing strategy is working)
This involves the study of:
the study of trends
comparative analysis

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assessment of present financial strengths and limitations for the whole business, brand
or component of the business, e.g. transportation.
b) Financial evaluation of alternatives
This involves the study of a number of factors like the market place, competitors etc., and
is used for decisions whether to:
introduce new products/delete mature products
expand the sales force or do more advertising
delete a market operation e.g. close a Dairy Board depot or increase the sales fleet
move into a new market or markets
build a new grain depot or silo.
c) Financial planning (projections concerning activities which marketing management
has decided to undertake)
Financial planning is used for a number of activities like:
the introduction of a new range of products
the forecasting of sales and costs
market liberalisation.
d) Financial control (actual compared to planned results)
This activity is mainly centered around keeping plans on course.
Methods involved in marketing financial analysis
There are a variety of methods used in each of the four functional areas. Some of these
include the following:
a) Financial situation analysis
Ratio analysis
Profit and contribution analysis
Sales and cost analysis.
b) Financial evaluation of alternatives
Sales and costs analysis
Break even analysis
Profit contribution, cash flow analysis, profit projections
Return on investment
Return on capital employed
Sustainable growth rates.

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Basic Finance For Marketers The marketing financial analysis circle Financial analysis can be used to serve many purposes in an organisation but in the area of marketing it has four main functions: a) to gauge how well marketing strategy is working (situation analysis) b) to evaluate marketing decision alternatives c) to develop plans for the future d) to control activities on a short term or-day to-day basis. In effect these four functions comprise what can be called the "Marketing Financial Analysis Circle" (see figure 1.1) Figure 1.1 The marketing-financial analysis circle Activities associated with marketing financial analysis functions For each of the four functional areas where financial analysis is useful in marketing, there are a number of associated activities viz: a) Financial situation analysis (how well marketing strategy is working) This involves the study of:  the study of trends  comparative analysis  assessment of present financial strengths and limitations for the whole business, brand or component of the business, e.g. transportation. b) Financial evaluation of alternatives This involves the study of a number of factors like the market place, competitors etc., and is used for decisions whether to:  introduce new products/delete mature products  expand the sales force or do more advertising  delete a market operation e.g. close a Dairy Board depot or increase the sales fleet  move into a new market or markets  build a new gr ...
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