ABSTRACT
The syllabus for section 34, Financial information to support marketing decisions, states that students wil peed to demonstmte their understanding of basic financial concepts through their application to marketing management decisions in a variety of contexts. Specific areas of application wilt include; 3,4 J , Direct product profitability (DPP), channel, category, product and market profit and cost analysis, 3.4.7. Application of ratio analysis in a variety of contexts* 34,8-The financial impact of marketing decisions {Including financial implications of marketing plans) and the sources of Information required, Profitability analysis, by various categories, and ratio analysis is useful as a guide to the Mure on the basis that what happened in the past may also happen in the future. This might not always be the case. Most profitability analysis and ratio analysis is based on historic informato and to a limited extent budgeted Information, The first part of this unit is focused on the profit and loss statement m4 the breaking down of f ie statement torn various viewpoints. The statement can be seen as a large two-dimensional matrix with analysis being made for any item along each dimension, Marketing managers may use Ms information to analyse any BTBB of t ie business, The
decision-making process of the managers will be enhanced through the use of profitability analysis. This was mentioned in Unit 4, 'Marginal Costing*, and partly in Unit 5, 'Overheads', but only discussed to a limited extent. The second part of this unit is concerned with reviewing the profit and loss statement and the balance sheet These two statements can be analysed under a number of headings, such as profitability, liquidity, activity, and gearing. The analysis is interpreted relatively, i.e. one value is compared to another. The reporting of absolute is not as useful Many of the ratios under the above four headings BIB focused on the balance sheet and the interaction with the profit and loss statement. The linking of the two enables a company perspective to be achieved, a financial helicopter view, Marketing managers would use these ratios for a number of reasons - overall they would be used to support plan* ning, control and decision-making. The ratios am useful in marketing decision-making as they provide the background information to many decisions, Historically any analysis of financial statements was limited by the availability of details in the statements and the time taken to prepare them. The two main statements were the profit and loss statement and the balance sheet. Analysis was carried out using these two summary statements, as insufficient data was available quickly to analyse the statements further. For organizations with separate divisions a set of financial accounts would be available for each division, with management accounts also being available in some companies, With the advent of advanced computers and data based information systems greater analysis is available. The data which can be gathered tends to be limited to the storage space capacity. Sophisticated coding systems have now been developed whereby any amount of analysis can be carried out. For such analysis to be carried out requires a detailed analysis of information needs. Unless the data is gathered, it cannot be converted into information, Many companies now use 12-digit codes, four for the financial accounts and eight for the management accounts. This unit is a development of Marketing in Practice at the Certificate level.
