Job Aid: Common formulas for Marketing Analysis A

Sample Statement at 100,000 units

COGS = Total Variable Costs
Income Statement Total Per Unit TVC = Quantity X VC/unit
Sales $100,000 $1.00 Selling Price/unit 100,000 X $0.30 = $30,000

-Cost of Goods Sold $ 30,000 $0.30 - Variable Cost/unit

Cost of Goods Sold =
=Gross Profit $ 70,000 $0.70 = Contribution/unit Opening Inventory
-Fixed Costs $30,000 $0.30 -Fixed Cost/Unit +Purchases
=Net Profit $ 40,000 $0.40 =Net Profit/Unit = Goods Available for Sale
Product Pricing Total Per Unit – Closing Inventory
Cost of Goods Sold $ 30,000 $0.30 VC/Unit NOTE: Opening Inventory of current year = Closing
inventory of previous year
+Fixed Costs $30,000 $0.30 +FC per Unit
+Profit $ 40,000 $0.40 +Net Profit/unit Balance Sheet
=Total Sales $100,000 $1.00 =Selling Price Current Assets Current Liabilities

Term Equation and Examples from above + Long Term Liabilities

Total Sales Quantity X SP = Cost of Goods Sold + Total Fixed
+ Fixed Assets = Total Liabilities
Costs + Profit
100,000 X $1.00 = $100,000 $30,000+$30,000+ $40,000 = $100,000 + Equities
Selling Price Unit Cost + Fixed $0.30 + $0.30 + $0.40 = $1.00
= Total Assets = Liabilities + Equities
Cost/unit + Profit/unit Assets = Liabilities + Equities
Net Worth = Assets - Liabilities
Gross Gross Contribution Contribution Equity = Net Worth
Profit ($) Margin (%) Margin (%) per unit ($)
Gross Profit (SP-VC/unit) SP – VC/unit Margin and Mark Up
Sales - COGS Gross Margin = Contribution Margin
Total Sales SP
Retail Markup % ≠ Contribution Margin %
$100,000-$30,000 = $70,000/$100,000 = 70% ($1.00 - $0.30)/ $1.00 = 70% $1.00 - $0.30 = $0.70
Retail Markup $ = Contribution per unit $
$70,000
Retail Markups
GP = (Fixed Costs VC = SP – (SP X CM %)
+ Profit) OR SP*(1-CM%) Markup % = (SP-VC)/VC
SP =VC/(1-CM%) SP = VC X (1+Markup%)
Retail Markup $ per unit Retail Markup % Retail Mark Up % VC = SP / (1+Markup %)
FC/unit + Profit/Unit FC/unit + SP-VC Total fixed Sales -
Profit/unit
= Retail Markdown
OR Costs + COGS
VC VC = New SP = Old SP – (Old SP X
SP - VC Profit COGS Markdown%)
COGS Mark down % = (New SP-Old SP)/Old SP
$0.30 + $0.40 = $0.70 ($0.30 + $0.40)/ $0.30 = $30,000 + $40,000/ $30,000 = Mark ups in retail are calculated on
233% 233% costs, mark downs on selling price.
BREAKEVEN is the $ or unit sales required to cover costs. When fixed costs are divided by contribution/unit, the breakeven units are calculated. When fixed costs are
divided by Contribution Margin, BE sales $ are calculated. You can forecast sales volume for a specific profit target using BE + Profit target formula. There are three
ways that Profit targets can be set: (1) as a $ target (2) as Per unit $ Target or (3) as % profit target
Breakeven Breakeven Sales Breakeven at Target Profit Breakeven at Target Profit*
Units * When given Profit as $ Goal * When given Profit goal as % sales or a $ per unit
Total Fixed Costs + Profit
Total Fixed Costs Total Fixed Costs
Total fixed costs Total Fixed Costs Target
Contribution$/unit Contribution Margin %
Contribution/Unit Contribution Margin Contribution
- Profit$/Unit - Profit Margin %
$30,000/ ($1-.3) = 42,858 $30,000/ (($1-.3)/$1)= $42,858 30,000 + 40,000 / 0.70 = 100,000 units $30,000 / $1.00 - $.30 - $0.4 = $30,000/(70%-40%) =
Units OR = 42,857 Units X $1 = $42,858 100,000 units $30,000/30% or $100,000
[OR BE dollars = BE Units (SP * % Profit = $Profit/Unit)
X SP]
Breakeven as % of Sales: Compare breakeven units/sales against sales forecasts and market share to assess for risk, achievability
and reasonability of marketing decisions.

Winter 2015
 Job Aid: Common formulas for Marketing Analysis B
Vertical Line Item $ Horizontal Analysis Current Year - Base Year
= =
Analysis Base $ (% Change) Base Year
[Base = Total Sales on Income Statement; Total Assets
for Balance sheet; Total Market for Market Share] [Base Year = The starting year, could be last year or the first year of the series]
Source
Ratio Type Formula Benchmark
of Data
Tradeoff
Total Sales
Assets Turnover (times) Efficiency with Profit BS IS
Total Assets margin
Advertising as Advertising/Marketing Expense By
Efficiency Industry
IS
Percentage of Sales Total Sales
2 BS
Current Assets
Current Ratio Liquidity By
Current Liabilities Industry
Solvency Total Liabilities
Debt ratio <50% BS
(leverage) Total Assets
Total Liabilities
Debt to Equity Ratio Solvency Net Worth 50-80% BS
*Net Worth = Total Equity
Expense Line Item By
Expense Ratio Efficiency Industry
IS
Sales
Gross Sales - FC +
By
Gross Margin Profitability Profit = COGS = Profit IS
industry
Sales Sales Sales
Inventory Balance (Year End) BS IS
Inventory to Sales Ratio Efficiency Other
Total Sales
Cost of Goods Sold
By
Inventory Turnover Efficiency Average Inventory industry
BS IS
[Ave Inv = (Open + Close)/2].
Profitability Net Profit Sales - COGS - FC By
Net Margin = industry
IS
Sales Sales
Current Assets LESS Inventory
Quick ratio (times) Liquidity 1 BS
Current Liabilities
Net Profit (before Tax) Higher the
Return on Assets (ROA) Profitability better
BS IS
Total Assets
Net Profit (Before Tax)
Return on Equity Profitability 10-14%
Owner's Equity
Return on Investment Net Income IS
Profitability Other
(ROI) Invested Capital
Net Marketing Contribution* Relative to
Marketing Investment return on
Return on Marketing *Net Marketing Contribution = Sales – COGS – Marketing
Profitability other Other
Investment (ROMI) Expense. investment
Focus on Incremental only (can be measured by Incremental
Net Profit, Contribution or Sales)
s
Net income before Tax +
Times interest earned
Liquidity Interest Expense Industry IS
ratio
Interest Expense

Working Capital Liquidity Current Assets LESS Current Liabilities Above $0 BS

Market Share = Market Growth = Share of Voice = Response Rate =

Company Sales Current Year - Last Year Market Sales Company Advertising Spend # Responders
Total Market Sales Last Year Market Sales Total Market Advertising Spend # Targeted
Company Sales = Mkt Sales x MS% New Sales = Old Sales X (1 + Growth Rate) Challenge: Defining market, how to track Challenge: Attributing
Mkt Sales = Co Sales/MS% Challenge: How to measure sales ($ or #, this advertising spend of competitors responses to tactics
years, next years or avg.) and defining the market

Winter 2015