Finance Function PDF

FINANCE FUNCTION  ROLES OF THE FINANCE D E PA R T M E N T : It is the role of the financial department to maximise profit by ensuring that there is enough capital available to carry our operations efficiently. The finance department controls ALL financial matters, such as income, expen...

FINANCE FUNCTION  ROLES OF THE FINANCE D E PA R T M E N T : It is the role of the financial department to maximise profit by ensuring that there is enough capital available to carry our operations efficiently. The finance department controls ALL financial matters, such as income, expenditure, pricing policy, investment etc. FEASIBILITY STUDIES Undertaken to investigate the potential benefits of doing a specific activity or project. The main aim of a feasibility study is to consider all factors associated with the project, and whether the investment of time and other resources will yield desirable results. 5 common factors of a feasibility study: - Technology and System Feasibility - Economic Feasibility - Legal Feasibility - Operational Feasibility - Schedule Feasibility EXAMPLES OF FA I L E D VENTURES Target in Canada: In 2013, Target attempted to enter the Canadian market. However, the expansion was plagued by logistical issues, pricing errors, and a lack of understanding of Canadian consumer preferences. Target ultimately closed all of its Canadian stores within two years. Shoprite in Nigeria: Despite its success in South Africa, Shoprite's expansion into Nigeria faced challenges related to economic instability, political uncertainty, and competition from local retailers. The company eventually decided to exit the Nigerian market.  GROUP ACTIVITY Mr Price is embarking on a 1. Brainstorm factors that Mr Price should consider when expanding. groundbreaking initiative to Encourage them to think broadly and consider various aspects of expand its reach and promote the business. sustainable fashion. The retailer 2. Once the brainstorming is complete, each group must categorize plans to introduce a new line of their ideas into the following categories: eco-friendly clothing and Market Feasibility: Factors related to the target market, demand, accessories made from recycled and competition. materials. This venture aligns with growing consumer demand Financial Feasibility: Factors related to costs, revenue, profitability, for sustainable products and Mr and financing. Price's commitment to Operational Feasibility: Factors related to resources, environmental responsibility. infrastructure, and logistics. The new line will feature a Legal and Regulatory Feasibility: Factors related to permits, variety of styles, including licenses, and compliance with laws. casual wear, activewear, and formal attire, catering to a wide range of customers  COSTS, REVENUE AND B R E A K- EVEN A N A LY S I S DIFFERENT COSTS  PRICING TECHNIQUES For example, Let's say that a clothing manufacturer produces a t-shirt that costs Cost Based Pricing- this means R100 to make. The manufacturer wants to make a 50% profit on each t-shirt. To that the cost of the product is calculate the selling price, the manufacturer used as a basis for determining would add 50% of the cost price to the cost the selling price. The cost price price. This can be calculated using the following formula: Selling price = Cost price plus a profit margin will give the + (Profit margin x Cost price) In this case, selling price. the selling price would be: Selling price = R100 + (50% x R100) Selling price = R100 + R50 Selling price = R150 Demand-based pricing- This For example, an uses the consumers willingness auction! Or certain to pay a certain price and the level of demand for a product as products such as the determining factor in setting cigarettes during the selling price. Covid! PRICING TECHNIQUES Competition-based pricing- The marketer will Combination Pricing- look at the prices charged Most businesses use a by competitors as an combination of the above- indicator for the price of his mentioned techniques when or her product. Goods may setting the selling price of be priced equal to, above or goods. below the market price.  O T H E R FA C T O R S A F F E C T I N G SELLING PRICES Psychological Pricing Promotional Pricing Penetration Pricing Bait Pricing F I N D M E A N A D V E RT T H AT D I S P L AY S TWO OF THE PRICING TECHNIQUES DISCUSSED! INVESTMENT S INSURANCE