FINANCE AND ACCOUNTING

Financial accountancy - is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company.

Financial accountants produce financial statements based on Generally Accepted Accounting Principles (GAAP) of a respective country. Financial accounting serves following purposes:

• producing general purpose financial statements
• provision of information used by management of a business entity for decision making, planning and performance evaluation
• for meeting regulatory requirements

Accounting - recording and reporting of financial transactions, including the origination of the transaction, its recognition, processing, and summarization in the FINANCIAL STATEMENTS.

Financial Statements - presentation of financial data including BALANCE SHEETS, INCOME STATEMENTS and STATEMENTS OF CASH FLOW, or any supporting statement that is intended to communicate an entity's financial position at a point in time and its results of operations for a period then ended.

A balance sheet - a statement of the book value of all of the assets and liabilities (including equity) of a business or other organization or person at a particular date, such as the end of a "fiscal year". A modern balance sheet usually has three parts: assets, liabilities and shareholders' equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as the 'net assets' or the 'net worth' of the company.

Income statements - a financial statement for companies that indicates how net revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported. Income statements, along with balance sheets, are the most basic elements required by potential lenders, such as banks, investors, and vendors. They will use the financial reporting contained there in to determine credit limits.

A cash flow statement - a financial statement that shows incoming and outgoing money during a particular period (often monthly or quarterly).
The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents, and breaks the analysis down according to operating, investing, and financing activities.

PRICING STRATEGIES

There are many kinds of pricing strategies, such as: Penetration Pricing, Influence of Elasticity, Cost - Plus Pricing, Contribution Pricing, Target Pricing, Marginal Cost Pricing, Absorption/full Cost Pricing, Market Skimming, Value Pricing, Loss Leader, Psychological Pricing, Going Rate (Price Leadership), Tender Pricing, Price Discrimination, Destroyer Pricing/Predatory Pricing.

Penetration Pricing

Is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price.

Market Skimming

• High price, Low volumes;
• Skim the profit from the market;
• Suitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out).

Value Pricing

Is the practice of setting prices based on the value of a product to the customer, in contrast with other approaches such as pricing based on cost.

Loss Leader

Is a type of pricing strategy where an item is sold below cost in an effort to stimulate other, profitable sales. It is a kind of sales promotion.

Psychological Pricing

Is a markwting practice based on the theory that certain prices have a psychological impact.

Going Rate (Price Leadership)

In case of price leader, rivals have difficulty in competing on price – too high and they lose market share, too low and the price leader would match price and force smaller rival out of market.

Tender Pricing

Many contracts awarded on a tender basis, firm (or firms) submit their price for carrying out the work, purchaser then chooses which represents best value, mostly done in secret.

Price Discrimination

Charging a different price for the same good/service in different markets, requires different price elasticity of demand in each market.

Destroyer Pricing/Predatory Pricing

Is the practice of a firm selling a product at very low price with the intent of driving competitors out of the market, or create a barrier to entry into the market for potential new competitors.

Absorption/Full Cost Pricing

Full Cost Pricing – attempting to set price to cover both fixed and variable costs.
Absorption Cost Pricing – Price set to ‘absorb’ some of the fixed costs of production.

Marginal Cost Pricing

Marginal cost – the cost of producing ONE extra or ONE fewer item of production. Marginal Cost Pricing – allows flexibility.

Contribution Pricing

Contribution = Selling Price – Variable (direct costs). Prices set to ensure coverage of variable costs and a ‘contribution’ to the fixed costs. Similar in principle to marginal cost pricing.

Target Pricing

Setting price to ‘target’ a specified profit level. Estimates of the cost and potential revenue at different prices, and thus the break-even have to be made, to determine the mark-up.

Cost-Plus Pricing

Calculation of the average cost (AC) plus a mark up.

Influence of Elasticity

Any pricing decision must be mindful of the impact of price elasticity. The degree of price elasticity impacts on the level of sales and hence revenue. Elasticity focuses on proportionate (percentage) changes. PED = % Change in Quantity demanded/% Change in Price.

MARKET RESEARCH

The aim of this lesson was:

• To understand the difference between primary and secondary market research;
• To understand how primary and secondary market research may be used by a business to help inform its marketing decisions.

Market research is consist of: Primary research, Secondary research, Purpose, Sampling methods.

Primary research: Questionnaires, Focus groups, User groups, Postal survey, Telephone surveys, Customer interviews, Test markets, Technology - internet feedback.
–First hand information;
–Expensive to collect, analyse and evaluate;
–Can be highly focussed and relevant;
–Care needs to be taken with the approach and methodology to ensure accuracy;
–Types of question – Closed – limited information gained; Open – useful information but difficult to analyse.

Quantitative and Qualitative Information:
Quantitative – based on numbers – 56% of eighteen year olds drink alcohol at least four times a week. Doesn’t tell you why, when, how. Qualitative – more detail – tells you why, when and how!

Secondary reserch: Internal sources, External sources.

Internal sources - Company Accounts, Internal Reports and Analysis, Stock Analysis, Retail data - till data, etc.

External sources - Government Statistics, EU - Euro Stat, Household Expenditure Survey, Magazine surveys, Other firms’ research, Research documents – publications, journals, etc., Web sites: commercial & non-commercial.

Sampling methods: Random samples, Stratified or segment random sampling, Quota sampling, Cluster sampling, Contact or ¨snowball¨ sampling, Multi-stage sampling.

Purpose: Size of market, Market trends, Forecasting, Planning, Evaluation of strategies/promotion, Assessing marketing mix, Identifying market segments, Identifying consumer needs, Identifying competition, Identifying opportunities, Reduce risk.

MARKET ANALYSIS

Market analysis consists of: market position, market objectives, market segments, market structure.

Market position - market niche, market leader, market follower, market challenger.

Market niche - small part of an existing market;

Market leader - maintain dominant position in the market;

Market follower - follow the lead of the market leader – pricing, product development etc;

Market challenger - seek to adopt strategies to challenge market leader’s position.


Market objectives - national growth, intwernational growth, ethical objectives, market share, consumer focus, product focus, image, social responsibility, revenue maximisation, shareholder value, overcome competitors.

Market objectives will involve/determine some or all of: Market Penetration, New Product Development, Branding, Diversification, SWOT Analysis.

Market segments - age, religion, gender, income level, lifestyle, ethnic grouping, social class, geographical religion, family circumstances, behaviouristic.

Segments: mass markets, multiple segments, single segment.

Mass markets - high volume, low margin goods – confectionary, cars, clothing, food stuffs;

Multiple segments - appealing to wider range of groups – e.g. 4x4 vehicles – town, country, gender, lifestyle, social class;

Single segment - often a specialised product, e.g. machinery, exclusive goods.

Market structure - highly competitive, imperfect competition, oligopoly, duopoly, monopoly.

Nature of the market structure determines marketing strategy:

• Pricing strategy;
• Branding;
• Product Differentiation;
• Market Penetration;
• Direct Selling.
  

QUANTITATIVE AND QUALITATIVE FACTORS IN DECISION MAKING

Quantitative factors

Provide a numerical basis for decision making – reduces decisions to looking at a monetary value placed on different choices, e.g. (Forecasted sales figures for the next 3 years; The cost of a series of redundancies against the longer term financial benefits to the firm of this process);

But: such data provides only part of the story

Other factors need to be taken into account, particularly the effects of decisions on stakeholder groups and their response to such decisions, e.g. (The takeover of Manchester United by Malcolm Glazer might make financial sense but the reaction of the supporters might make the move unworkable).

Qualitative factors

Qualitative factors look to take account of these other issues that may influence the outcome of a decision;
Can be wide ranging and especially need to consider the impact on human resources and their response to decisions.

SWOT

SWOT Analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture or in any other situation of an organization or individual requiring a decision in pursuit of an objective. It involves monitoring the marketing environment internal and external to the organization or individual.

PEST

Might also need to factor in other external issues that might influence the decision making process which can be summarised as:
–Political
–Economic
–Sociocultural
–Technological
Political could be in its widest sense, e.g. the internal politics of a firm as well as the national and international political effect.

Human Resources Management

Impact on a firm’s human resources is essential to consider, in particular the effects on:
–Motivation
–Morale
–Recruitment and Retention
–May be difficulty to assess and measure
–May need to distinguish between short term effects and long term.

Decision Making

Decision making is the cognitive process leading to the selection of a course of action among alternatives. Every decision making process produces a final choice. It can be an action or an opinion. It begins when we need to do something but we do not know what.

• Eventual decision may rest on the balance between the perceived effects of quantitative and qualitative.
• If the long term effect on the workforce for example was to reduce productivity or increase absence because of the impact on motivation and morale, the fact that a decision makes financial sense may be shelved!
• Qualitative by its nature, therefore, is very subjective.
  

MAKE A GOOD PRESENTATION

Presentation - is the process of presenting the content of a topic to an audience.

What makes a good presentation?

The material of presentation should be concise, to the point and tell about interesting things. In addition to the obvious things like content and visual aids, the following are just as important as the audience will be subconsciously taking them in:

• Your voice - how you say it is as important as what you say;
• Body language - a subject in its own right and something about which much has been written and said. In essence, your body movements express what your attitudes and thoughts really are;
• Appearance - first impressions influence the audience's attitudes to you. Dress appropriately for the occasion.

It is important to prepare the structure of the talk carefully and logically, just as you would for a written report. What are:

1. The objectives of the talk;
2. The main points you want to make.

So:

• Introduce yourself;
• Comunicate with other people;
• Speak clearly, slowly, understandable;
• Use visual aids;
• Trust yourself;
• Never read from a script.

Be yourself - create the your brand and image - it's far easier than trying to copy anyone else and also is a great differentiator.
Be in your optimum presentation state - this is calm, connected, energized, curious, happy.

Be optimistic, sound cheery and smile -that’s what people will remember.

Don't be afraid to state what is obvious to you, it may not be obvious to the audience .

The most important think is :

Know your subject and know it well or else don’t stand up!

Finally ...,
Enjoy yourself.

The audience will be on your side and want to hear what you have to say!

BUSINESS ORGANISATION

BUSINESS ORGANISATION:

business functions and organisation charts

There are 7 business functions such as:

• Human resources
• Sales and Marketing
• Research and Development
• Production/Operations
• Customer Service
• Finance and Accounts
• Administration and IT

Teacher was talking about those functions, about all of them,explained everything. Human resources function: Recruitment and retention (Job descriptions, Person Specifications );Dismissal; Redundancy; Motivation; Professional development and training; Health and safety and conditions at work; Liaison with trade unions.

Sales marketing: Market research; Promotion strategies; Pricing strategies; Sales strategies; The sales team; Product – advice on new product development, product improvement, extension strategies, target markets.

Research and development: New product development; Product improvements; Competitive advantage; Value added; Product testing; Efficiency gains; Cost savings.

Production/Operations: Acquiring resources; Planning output – labour, capital, land; Monitoring costs; Projections on future output; Production methods; Efficiency.

Customer service: Monitoring distribution; After-sales service; Handling consumer enquiries; Offering advice to consumers; Dealing with customer complaints; Publicity and public relations.

Finance and accounts: Cash flow (Monitoring income/revenue, Monitoring expenditure); Preparing accounts; Raising finance (Shares, Loans); Links with all other functional areas.

Administration and IT: Managing estates – cleaning, health and safety, maintenance, security; Reception; Clerical work – reporting, recording, record keeping, communication; Overview of quality control; Use of IT systems.

Then we were talking about organisation charts. There are 4 types of srtuctures:

1. Hierarchical structure;
2. Pyramidal structure;
3. Centralised/Entrepreneurial;
4. Matrix structure.