Financial Statement Analysis for Marketing and advertising Executives

While there is no need to become a qualified accountant to create a method for Sales Perfection, a fundamental understanding of what’s involved with financial analysis is important for anybody in marketing and advertising. It’s too enticing, and frequently too easy, to make use of “blue skies” thinking in planning marketing and advertising activities. It’s even simpler to invest money without fully realizing the return the first is getting for this. It is important that marketing and advertising executives become more disciplined and analytical in the manner they’re going about planning, executing and evaluating the marketing and advertising plans and strategy. Just one way of presenting more discipline into the operation is by getting a fundamental knowledge of the financial implications of making decisions, and just how financial measures may be used to monitor and control marketing operations. The objective of this text would be to provide just that, and also the first chapter deals essentially with introducing those activities involved with financial analysis.

The Earnings Statement

The P&L (profit and loss) statement also known as the earnings statement is highlighted below. It is really an abbreviated version since many earnings statements contain a lot more detail, for instance, expenses are usually listed according to their individual.

G/L ledger account:

The earnings statement measures an organization’s financial performance on the specific accounting period. Financial performance is assessed by providing a listing of the way the business incurs its revenues and expenses through both operating and non-operating activities. Additionally, it shows the internet profit or loss incurred on the specific accounting period, typically on the fiscal quarter or year. The earnings statement is also referred to as the “profit and loss statement” or “statement of revenue and expense.”

Sales – They are understood to be total sales (revenues) throughout the accounting period. Remember these sales are internet of returns, allowances and discounts.

Discounts – they are discounts earned by customers for having to pay their bills on tie for your company.

Price of Goods Offered (COGS) – They are all of the direct costs that are based on the merchandise or made service offered and recorded throughout the accounting period.

Operating expenses – Included in this are other expenses that aren’t incorporated in COGS but are based on the whole process of the company throughout the specified accounting period. This account is most generally known as “SG&A” (sales general and administrative) and includes expenses for example sales salaries, payroll taxes, administrative salaries, support salaries, and insurance. Material handling expenses are generally warehousing costs, maintenance, administrative office expenses (rent, computers, accounting charges, legal charges). It’s also common practice to designate a separation of expense allocation for marketing and variable selling (travel and entertainment).