Finance Key Terms and calculations (topics 117-122)

Question 1

Extension Strategy:

Answer 1

Prolongs the product’s life to delay the decline stage, using methods like promotions, new flavours, or packaging.

Question 2

Boston Matrix:

Answer 2

Classifies products by market growth and share:

Stars: High growth, high share.
Cash Cows: Low growth, high share.
Question Marks: High growth, low share.
Dogs: Low growth, low share.

Question 3

Penetration Pricing:

Answer 3

Charging Low prices to enter a competitive, price-sensitive market and price is elastic

Question 4

Price Skimming:

Answer 4

High prices initially to maximise profit for unique, inelastic-demand products.

Question 5

Cost-Plus Pricing:

Answer 5

Adds a profit margin to production costs.

Question 6

Competitive Pricing:

Answer 6

Sets prices based on competitors’ pricing strategies.

Question 7

Psychological Pricing:

Answer 7

Prices designed to appear cheaper, e.g., 99p instead of £1.

Question 8

Contribution Pricing:

Answer 8

Prices cover variable costs plus a contribution towards fixed costs and profit.( Selling Price- Variable cost per unit)

Question 9

Above the Line Promotion:

Answer 9

Mass media advertising (e.g., newspapers, TV, radio, social media) to reach a large audience indirectly.

Question 10

Below the Line Promotion:

Answer 10

Direct promotional strategies targeting consumers, e.g., personal selling, packaging, direct mail, sponsorship, or public relations.

Question 11

Multi-Channel Distribution:

Answer 11

Combines multiple routes to reach consumers, such as retailers and online platforms.

Question 11

Distribution Channel:

Answer 11

The path a product takes from producer to consumer, using wholesalers, retailers, or direct selling.

Options:
1.Producer → Wholesaler → Retailer → Consumer
2.Producer → Retailer → Consumer
3.Producer → Consumer

Question 12

Digital Media:

Answer 12

Content (text, video, graphics) shared online via screens for internet-based viewing

Question 13

E-Tailing:

Answer 13

Online retailing, where consumers buy goods or services directly from sellers over the internet.

Question 14

M-Commerce:

Answer 14

Buying and selling goods/services via mobile devices or apps.

Question 15

Budget:

Answer 15

A financial plan for managing future expenditure and/or revenue.

Question 16

Variance Analysis:

Answer 16

Comparing actual outcomes to budgeted figures to identify differences.

Question 17

Adverse Variance:

Answer 17

Occurs when actual costs are higher or actual revenue is lower than budgeted, leading to less profit.

Question 18

Favourable Variance:

Answer 18

Occurs when actual costs are lower or actual revenue is higher than budgeted, leading to more profit.