Factors that Makeup Prices Analyzing Revenues, Costs, & Expenses

What is Price? Price is the value of money placed on a good or service. -Important factor that helps establish and maintain a firm’s image, competitive edge, and profits.

Factors that must be addressed in a price Cost of Goods – Amount to purchase or produce goods to be sold Overhead Expenses – Costs of operating a business. Profit – Amount of money left over after costs and expenses are paid.

Revenue Any money that is generated and flows into a business. Most money in a business is generated through sales revenue Price determines how much sales revenue is generated

Examples of Non-Sales Revenues in Sports Marketing Sponsorship Revenues Licensing Revenues Interest Earned

Costs & Expenses Any money paid by a company to operate and maintain the business. Dollars that flow out of a business

Basic Business Formula Revenue – Costs & Expenses = Net Profit or Loss

Income Statement A financial statement that lists a company’s revenue & expenses to determine net profit or loss over a period of time. (Referred to as a company’s bottom line)

Break-even Point Revenue = Costs & Expenses

Markup or Margin The amount of profit added to costs or breakeven point. Price – Costs(B.E.P) = Markup(profit)

Markup is usually expressed as a percentage. Basic Pricing Formula Costs + Markup = Price Markup is usually expressed as a percentage.

Other factors Affecting Price Competition Quality/Image Supply & Demand Channels of Distribution Promotional Discounts Seasonal Discounts

The Main Goal of all Businesses Revenue > Costs & Expenses