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INTRODUCTION TO BUSINESS (MGT 211)

FINAL TERM SYLLABUS

Lecture 23:

Marketing Selling
Marketing starts before decision of production Selling starts after decision of production
Marketing is a whole system Selling is a part of marketing
Marketing is a long term process. Selling is a short term process

Classification of products:

Consumer products:

• Consumer products are consumed after certain uses. E.g. tea, soap, tooth paste, shaving
cream, cooking oil etc.

Industrial products:

• Industrial products are used in industry. E.g. raw material, machinery, chemicals,
computer hardware and software.

Relationship marketing:

• Developing a long term relationship with the customers.

Transactional marketing:

• Transaction with the customer.

Factors influencing the marketing system:

• External marketing environmental factors.

• Internal marketing environmental factors

External marketing environmental factors:

• Factors which are outside the organization and influence the system,
• External factors are generally beyond the control of one marketing firm. These includes:
• Economic factor
• Demographic forces (forces related to population)
• Cultural forces
• Political and legal forces.

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• Competition
• Natural forces

Marketing manager:

• A person who plans and execute all marketing activities.

Role of marketing manager:

• To identify the unsatisfied needs of the customers

• To design the product

Product development:

• Pricing decisions
• Product distribution
• Communication with the customers
• Marketing research
• Appointment of staff in marketing department

Marketing plan:

• A plan for marketing programs.

Components of marketing plan are:

• Executive summary
• Current marketing situation
• Opportunity analysis
• Marketing objectives
• Marketing strategies
• Projected income statement
• Control

Lecture 24:

The Marketing Mix:

• A combination of four p’s.

• Four p’s are:
• Product
• Price
• Place
• Promotion

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Product:

• A set of physical and tangible attributes assembled in an identifiable form.

• A set of things, an organization offer for sale.

Price:

• Expected price is that price at which customers anxiously or unconsciously value the
product.

Place:

• Place in terms of distribution.

Promotion:

• Promotion is also called marketing communication.

Techniques used for promotion are:

• Advertising (any paid form of non-personal presentation for the promotion of goods,
services and ideas to the potential customers.)
• Personal selling
• Sales promotion
• Public relations (development of direct link with general public)

Market segmentation:

• Dividing the total market into smaller parts.

• Market is heterogeneous/dissimilar
• By segmentation, heterogeneous market is converted into homogeneous components.

Market targeting:

• Who will be the customers of the organization?

Product Differentiation:

• To differentiate the product from other products on the basis of features.

• Product differentiation is used to avoid competition.

Basis for segmentation:

• Geographic basis
• Demographic basis
• Psychographics

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• Behavioral

Lecture 27:

Product:

• Anything that can be offered for sale by an organization.

• Products can be:
• Tangible
• Intangible
• Benefits are basic features of the product
• Every product has a set of features to identify itself.

Classification of products:

• Products are divided into various ways.

• Mainly these are divided into
• Consumer products
• Industrial products

Categories of consumer products:

Convenience goods:

• Goods which are convenient to buy for the customers

• Customers has complete awareness of the product
• Customer buys these products frequently.

Shopping goods:

Specialty goods:

• For these products, customers have strong brand loyalty.

Industrial goods:

• Goods used in the industry.

Categories of industrial goods:

Capital items:

• These are long lived and expensive goods

• Sometimes copyrights are purchased, these are also capital goods

Expense items:

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• These can be
• Raw material
• Some utility items
• Oil
• Grease
• Some tools

Product mix:

• All these products offered by an organization for sale.

Product line:

• Products which are similar to each other.

Steps for product development:

• Recognition of unsatisfied needs

• Idea generation
• Idea screening
• Prototype: physical shape of the product
• Product testing:
• These are of two types
• Laboratory test
• Market test or test marketing
• Product is sold on trial basis.

Commercialization:

• Product is sold on commercial basis

• This concept is also called mass marketing.

Lecture 28:

Product life cycle:

Introduction stage:

• A stage when a new product is introduced in the market.

• There are one or few manufacturers in the market.

Growth stage:

• Sale of the product will increase due to

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• Repeated orders of the old customers

• New customers will also enter the market

Maturity stage:

• Highest level of sales in the market because of awareness about the product.
• More sellers will also enter in the market.

Decline stage:

• Sale will start decreasing

• At this stage, product will disappear from the market.

Use of product cycle in decision making process:

Introduction stage:

• Marketers can dictate more of their policies.

• At this stage, customers of the product are venture some (who like to try new ideas)
• Marketer can keep this prices high because
• Customer can afford to spend more money.
• High cost
• There will be not much profit at this stage.

Growth stage:

• Marketers will earn more profit due to

• Small number of manufactures
• Less competition
• High sales

Maturity stage:

• Marketers will also revise their marketing strategies i.e. they will find new segments of
the market for their product.
• Per unit profit might reduce at this stage.

Decline stage:

• Marketers should sell the products to selective customers.

• At this stage, marketers will introduce innovations in the product to keep their sales high.

Branding products:

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• Brand is a symbol, a sign, a type of writing, a color, a design or a combination of all these
things to identify a product.
• Branding is a process in which any identification is suggested for the product.
• Brand equity is the loyalty of the customers attached to the product.
• Brand awareness is the extent to which a customer knows or recalls the brand of the
product.

Types of brand names (national brands):

• A brand that is sold throughout the country.

License brands:

• Seller buys the right to use that brand in the market.

Private brands:

• Manufacturers use the brand of some retailer while manufacturing the product.

Packaging & labeling:

Packaging:

• Dress of the product

• Designing and making of the wrapper of the product

Labeling:

• Part of package containing name, contents and name of manufacturing of the product is
called a label.

Lecture 29:

Pricing:

• Price is the value which a seller receives in exchange of a good or a service.

Objectives of pricing:

• Maximization of profit
• Increasing market share

Cost based pricing:

• Cost of product is considered and amount of profit is added to it.

Breakeven analysis:

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• An analysis that tells us at what point the organization will be at no profit no loss point.
• To calculate breakeven point, we need to consider
• Fixed cost
• Variable cost

Fixed cost:

• Fixed cost will remain fixed regardless of number of units produced.

Variable cost:

• Variable cost varies with the number of units produced.

Total cost = fixed cost + variable cost

• Concept of breakeven analysis is used in cost based pricing.

Pricing of a new product:

Price skimming:

• A strategy through which a product is introduced in the market with higher price than the
market expectation.

Advantages of price skimming:

• If there is any mistake in calculation of cost, price skimming strategy will absorb that
mistake due to initial higher price.
• Sometimes, customers value the quality of the product with its price.

Penetrating pricing:

• Initial lower price than the market expectations.

Advantages of penetrating pricing:

• A larger market share can be captured through this pricing strategy.

• Pricing depends upon the objectives of the organization.

Fixed price vs. dynamic price:

• In fixed price method, we do not consider

• Type of customer
• Type of community
• Location of the sale point
• In dynamic pricing, price will vary from

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• Customer to customer
• Market to market

Factors to be considered while setting international pricing:

• Currency
• Exchange rate
• Taxes by the government
• Tariff
• Freight
• Insurance

Distribution mix:

• Combination of all channels which an organization is using for distribution of product in

the market.
• Distribution mix will vary from product to product and to market

Parties involved in distribution mix:

Whole seller:

• Those organizations which buy and sell in bulk quantities.

• Whole sellers are the people who buy from the company and sell to those people who buy
for resale purposes.

Retailer:

• Retailer is one who sells goods in small quantity to end buyers.

Distribution channel:

• A network of interdependent bodies which make the flow of product possible from the
marketer to the end buyer.

Distribution channel for customer products:

• For a consumer product, members of distribution channel are larger in number.

• Members add value to distribution process by reducing transactions
• Distribution channels work for place utility.

Activities performed by the distributors:

• Storage capacity.
• Financing to the company

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• Information/ research function.

• Distribution function.

Lecture 30:

Agent:

• A person who brings buyers and sellers together.

• People who are technically sound.
• Work for both parties.

Distribution channel for industrial product:

Whole-seller:

• Buys from company and sells to the industry.

Supplier:

• Supplies industry products to users on behalf of manufacturers.

Distribution strategies:

Intensive distribution:

• When there is large number of intermediaries.

• This strategy is used for most consumer goods.

Exclusive distribution:

• Sellers have an exclusive target market.

• Few intermediaries.
• For low price consumer items, intensive distribution is used.
• For high price items, exclusive distribution is used.

Channel conflict:

• Channel conflict is created when there are differences between marketer and channel
member.

Channel conflicts can be on:

• Pricing
• Supply of goods
• Collection and recoveries.

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Channel leadership:

• A person or an organization which carries more power in distribution decision making

process.

Retailer:

• A person who purchases in bulk quantity and sells to end buyers.

Types of retailers:

Product line retailer:

• Who distributes a product line.

Bargain retailer:

Catalogue:

• Catalogue is a book or a brochure which carries products features and prices.

• Retailer distributes catalogues to the buyers.

Discount houses:

• Organizations which offer discounted prices.

Factory outlet:

• A shop adjacent to the organization where products of the organizations are sold.

Convenience stores:

• Offer services for longer hours.

• Slightly higher prices than super stores.
• Only those products are kept which are more in demand.

Physical distribution:

• An arrangement which makes possible physical movement of the product from

manufacturer to end buyer.

For physical distribution of product we consider:

• Methods for distribution

• Pricing, speed and other factors for distribution

Modes of transportation:

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• Trucks
• Railways
• Air crafts are used when speed is more important
• Used for:
• Flowers
• Fruits
• Vegetables
• Ships

Selection of mode of transportation:

• Changes in mode of transportation is considered:

Inter-Model transportation:

• More than one mode of transportation is available.

Factors to be considered for movement of product:

• Cost
• Nature of product
• Distance
• Requirement of the customers

Promotion:

• Using variety of techniques to communicate with the customers about product, price,
features or policy of the company.

Promotion mix:

• Variety of ways used to communicate with the buyer.

Goals of promotion:

• Creating awareness
• Persuade the customer to like product
• Persuade the customer o buy product.

Lecture 31:

Strategies for promotion:

Pull strategy:

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• A strategy in which promotional campaign is targeted on end buyer.

• End buyers are influenced through the media to go and buy the product from middle man.

Push strategy:

• A campaign which is targeted on middle man.

• Incentive is given to middle man for sale of product.
• Marketers work on both strategies simultaneously.

Promotional mix:

• All promotional tools used by the organization to communicate with the customers.
• It includes:
• Advertising
• Personal selling
• Public relations

Advertising:

Types of advertising:

Persuasive advertising:

• Customer is persuaded to buy the product in comparison with others competitors.

Comparative advertising:

• Product is compared with competitors product

• In some countries this techniques is not allowed

Reminder advertising:

• Customers are reminded about the product, the brand the features or the manufacturers.

Advertising media:

• Media is a way to communicate with target audience.

Variety of media:

Print media:

• All media in printed form e.g. newspapers and magazines.

Advantages of newspapers:

• Easy access to general public.

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• Life of magazines is longer than newspapers.

• To understand the message in newspaper, reader can read it again and again.

Disadvantages of newspapers:

• Low literacy rate.

• Quality of printing

Electronic media:

• Most extensively used medium in television

Advantages of television:

• Available almost everywhere.

• Television offers variety of things together. i.e. watching & listening
• Variety of facilities available to make message more attractive.

Disadvantages of television:

• In many areas, facility of electricity is not available.

• Target audience might not have time to watch television.
• Television is very expensive.

Radio:

• Radio reaches almost everywhere.

• Radio is working like a personal friend for many people.
• Radio is much cheaper as compared to television.

Limitations of Radio:

• Radio does not offer pictures.

Outdoor media:

• Hoardings show bigger image of the product.

Limitations of hoardings:

• It is difficult to find an appropriate spot for hoardings.

Other ways of promotion:

• Cinema advertising
• Telephone directory

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• Yellow pages
• Railway time table
• Panels of buses
• Messages in trains

Unique ideas for promotion:

• Sky writing
• Laser writing

Choice of media for promotion:

• No single medium can be considered as best medium.

• It depends upon:
• Cost
• Quality of production/ printing
• Circulation
• Editorial environment
• Life of message

Media mix:

• Using different medias at the same time for the promotion of goods

Advertising campaign:

• Use of advertising tools to reach the customers.

Advertising agency:

• An independent body which have experts for various areas of promotion.

• Most of the large institutions use advertising agencies for promotion of their products.

Lecture 32:

How to design advertising campaign:

• Selection for those Medias which are powerful and effective to achieve organizational
objectives.

Identification of target market:

• Education class
• Rural or urban customers
• Age of the customers

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• Social class

Allocation of budget:

• Percentage of expected sales

• Considering targets/ objectives
• Considering the competitors

Advertising objectives:

Message creation:

• Appropriate language
• Appropriate words

Choice of appropriate media:

Evaluation of advertisement:

• Advertisement research
• Sales volume

Personal selling:

• One to one communication

Personal selling is used where:

• Customers are not very large

• Customers want to know about the product in detail.

Personal selling can be used for selling:

• Consumer items
• Industrial products
• Pharmaceutical products

Financial management:

• The effective and efficient management of monetary resources of an organization in such

a manner, as to accomplish the objectives of the organization.

Income statement:

• It is a financial statement listing a firm’s annual revenues and expenses so that a bottom
line shows annual profit or loss.

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• If the balance sheet is a “snapshot” the income statement is a “movie”.

Revenues:

• Funds hat flow into a business from the sale of goods and services.

Costs of goods sold:

• Total cost obtaining material for making the products sold by the firm during the year.

Gross profit:

• Revenues obtained from goods sold minus cost of goods sold.

Operating expenses:

• Costs, other than the cost of goods sold, incurred in producing a good or service.

Operating income:

• Gross profit minus operating expenses

Net income:

• Gross profit minus operating expenses and income taxes.

Profit:

• Profit is obtained after deducting expenses from revenue.

Trading concern:

• An organization which buys goods for reselling is called trading concern.

Cash-flow management:

• Management of cash inflows and outflows to ensure adequate for purchases and the
productive use of excess funds.

The accounting equation:

Assets = liabilities + owner’s equity

Asset:

• Any economic resource expected to benefit a firm or an individual who owns it.

Liability:

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• These are all payables, claims or obligations of the firm.

Accounting:

• A system of recording, classifying, analyzing, summarizing, and reporting the economic

information in terms of money.

Lecture 33:

Tasks of sales manager:

• To defines the sales objectives.

• Sales objective can be
• Increasing sales
• Controlling sales
• Organization of a team
• Implementation of plans
• Territory management

Personal selling task:

• Booking of order
• Processing f orders
• Creative selling

Missionary selling:

• To sell products by helping the buyer.

Personal selling process:

Prospecting:

• Find the prospective customers.

It includes:

• Location of the industry

• To know that decision maker of the organization.
• Method for ordering in the organization.
• Size of order
• Mode of payment
• Past practices of the organization.
• Current problems.

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Techniques for prospecting:

Snowball technique:

• To ask a satisfied customer, about more customers to sell the product.

Cold conversing technique:

• Knocking everybody door’s

Features of the prospective buyer:

• Age of the person

• Interests of the person
• Preference of the person

Approaching the customer:

• There are two options for approaching the customer

• Getting appointment from the customer/ without getting appointment.

Advantages of appointment:

• Proper hearing
• Customer will get the feeling that his time is being respected.

Disadvantages of appointment:

• Customer might say no.

• Sales person might not be able to reach in time.

Advantages of not getting appointment:

• Time is in control of sales person

• Sales person does not have fear of getting no

Disadvantages of not getting appointment:

• Customer might feel that person is not an organized person.

Barriers:

• Sales person might face some barriers in approaching the customer.

• There barriers can be
• Security guard
• Receptionist

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• Junior officer

Lecture 34:

Presentation stage:

• After approaching the buyer, sales person review the situation.

• It includes
• Type of furniture
• Wall hangings
• Type of curtains
• Personal taste

Way to start conversation:

• Ask a question
• In case of appointment, direct conversation may be started
• Avoid unpleasant event to start discussion?

Interest stage:

• Sales person will try to create interest of the customer in the product.
• Interest of the customer can be
• Prices
• After sale service
• Guarantees and warranties

Objection stage:

• Sales person will try to create desire in the customers to buy product
• Customers will start raising objections
• Sales person will handle the objections raised by the customer

Closing stage:

• Getting the order.

Follow up stage:

• Follow up for execution of order.

AIDA:

• AIDA stands for

• Attention

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• Interest
• Desire
• Action

Types of customers:

Skeptic customers:

• Doubtful behavior of the customer because of deception from any seller in the past.
• Aggressive customers

Innovation in sales:

• E-commerce

Tele-marketing or Tele-selling:

• Selling through telephone

Sales promotion:

• Promotion of a good or a service for a short time.

Techniques for sales promotion:

• Arrangement for a contest

Trade shows:

• Display of products at different places

• Advertisement of product through entertainment
• POP (point of purchase promotion)
• POS (point of sales promotion)
• Promotional material at point of sale can be
• Hangings
• Promotional messages
• Window display
• Wracks

Publicity:

• An unpaid form of promotion through mass media

Publicity can be:

• News about the company in the newspaper

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Advantages of publicity:

• Publicity is more reliable because of unpaid form of promotion

Public relations:

• All activities through which a relationship is developed with the public.

Lecture 35:

Production:

• Conversion of raw materials into finished goods

• Adding value to raw material, processing it and making it a new useful product.

Utility:

• Ability of a product to satisfy a need.

Forms of utility:

Time utility:

• Getting a product when required.

Place utility:

• Product is manufactured at one place and is sold at another place.

• Utility of the product increased due to its mobility.

Form utility:

• Changing the form of the product and converting it into some useful form.

Operational planning:

Operation mangers decide about:

• The production capacity of the organization.

• The appropriate location of the industry.

Factors for location of industry:

• Availability of skilled workers

• Availability of infrastructure
• It includes
• Electricity

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• Gas
• Water
• Telephone
• Access to road transport and railways
• Availability of raw material
• Climatic conditions

Facilities to be organized for production process:

• Productive facilities
• Nonproductive facilities
• Support facilities

Layout plan:

• Internal arrangements in the organization

• These include
• Placement of machinery
• Movement of people
• Water storage
• Entry and exist points

Layout designing options:

• Considering the product

• Process involved in production
• Cellular layout
• Production layout
• Placement layout
• Flexible layout
• Other layouts
• U-shaped layouts
• Straight line layouts

Reasons for designing a layout:

• To increase efficiency
• To reduce cost
• To avoid accidents
• To avoid delays

Lecture 37:

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Total quality management:

• Collection of all activities in an organization being performed for producing quality

products.

Productivity:

• More output with less input.

Quality:

• Fitness for use.

• If price is high, quality of product will increase.

Prominent features of Dr. Deming’s 14 points:

• Organization should adopt the philosophy of quality rather than quantity.

• Training of employees should be a continuous system.
• Training is the key to achieve total quality management
• Modern techniques should be used to train the staff in the organizations.
• Workers should bring creative ideas to improve quality of the product
• It is very important to assure the workers that new ideas will be encouraged
• Barriers between different departments should be removed
• Statistical methods should be used to control quality.

Human resource management for total quality management:

Selection stage:

• HR manager must make sure that quality people are selected in the organization.
• Quality people are those whose focus on quality rather than quantity.
• HR manager should see whether particular person has attitude required in the
organization or not.
• Attitude includes
• Being flexible
• Being adaptable
• Quality conscious
• A person who can work in a team

Training stage:

• Team leading
• Mind adjustment
• Changing paradigm

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• Avoiding box thinking

• Developing creative ideas

Compensation:

• HR manager should develop special systems for compensation

• These include
• Compensation should give to the whole group

Performance appraisal:

• Collective performance appraisal

Statistical process control:

• Using statistical techniques in

• Planning
• Execution
• Problem analysis
• Control
• Use of graphics to display date.

Graphics include:

• Bar charts
• Pie charts
• Fish bone diagram

Lecture 38:

Cost of quality:

• Cost paid in the market for not having quality products.

Types of cost:

External failure costs:

• Cost incurred for managing the problems faced in selling the product in the market.

External failure cost includes:

• Cost incurred on sales return

• Repair cost of faulty goods
• Customer service cost

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• Repair cost of returned goods

• Cost for investigation of defects
• Cost of product recalls
• Cost for product liability suits.

Internal failure costs:

• Costs are paid within organization.

Internal failure costs include:

• Cost of scrap
• Cost for re-work on product
• Cost for inspection of re-work
• Cost for down grading
• Product is graded below standard due to some fault
• Cost for failure analysis

Appraisal costs:

Appraisal costs include cost of:

• Inspection
• Laboratory testing
• Laboratory equipment maintenance
• Calibration of testing equipment

Prevention costs:

• Cost incurred to prevent faults in the products

Prevention costs include:

• Cost for making a preventive network

• Managerial work for quality.
• It includes
• Quality planning
• Training
• Cost for quality improvement process
• Cost for using statistical methods
• Cost for maintenance of machinery, equipment etc.
• Cost for hiring experts

ISO 2000; 9000 certificate program:

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• A standardized system which provides a set of system to the organization

• ISO is a certificate which shows that organization is following some system and that
system might lead to some quality products

ISO 14000:

• A system for environment

• Organizations are responsible for environment
• A system that certifies the organization for protecting the environment is called
ISoO14000

Value chain management:

• All activities performed are working in a chain to produce a valued product.

Lecture 39:

Benchmarking:

• Comparison with others.

Comparison of:

• Products
• Processes
• Instruments
• Culture of organization

Zero defect level:

• A stage where there is no defect in the product, process and organization.

Considerations in benchmarking:

• Identification of processes to be benchmarked

• Sale forecasting
• Pricing
• Distributions
• To maintain financial record
• Technology

Key variables in a process:

• Product
• Shape of product

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• Color
• Size
• Weight
• Angle
• Performance
• Selling and marketing
• Cost
• Variety of heads in costing
• Productivity
• Mixture of ingredients
• Timeliness
• Differentiation of products
• Purchasing
• Identification of best organization
• Measurement of own performance
• Action to close the gap.
• Organization should go for benchmarking when there is more competition in the market.
• Benchmarking can be done for two entirely difficult products or organizations
• Organization should benchmark its processes or products with the best organization in
that\t class
• Benchmarking can be used for personality development

Lecture 41:

Verbal vs. non-verbal communication:

• Sources of non-verbal communication can be

• Body language: body language is used during face to face communication
• It includes
• Postures
• Gestures
• Face
• Eyes
• Smile
• Channel: carrier which carries the message from sender to receiver
• Channel can be
• Letter
• Telephone
• Fax
• A person who carries the message to other person

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Letter vs. memorandum:

• Letter is written for communication outside the organization

• Memorandum is written for communication inside the organization

Types of letter:

• Inquiry letter
• Reply to the inquiry letter
• Order letter
• Complaint letter
• Adjustment letter

Information system (IS):

• Arrangement of information into a form that can be used for decision making purposes

Information management:

• Arrangement of information into a form which is useful for management

Duties of information manager:

• Information gathering
• Information organizing
• Information distribution

Uses of information:

• Head of manufacturing department

• Marketing people
• Planning people

Data vs. information:

• Data is raw figures and facts

• Meaningful shape of data is called information.

Why information system is important in the organization?

• Frequent use of information

• New technology
• New innovations, processes and methods

New communication devices:

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• Telephone
• Intercom
• Digital business system

Data communication network:

• Global network for receiving and sending the information globally, quickly and
economically.

Services of internet:

• Information can be accessed globally and free of charge

• Speed
• Cheaper

Lecture 43:

Ledger:

• A book in which all economic information is recorded category wise or heading wise.

Accounting period:

• Time span in which accounts are terminated.

Summarizing:

• Summary of all revenues and expenses.

Income statement:

• A statement which shows the position of revenues and expenses or profit and loss

Profit:

• Excess of revenues over expenditures.

Loss:

• Excess of expenditures over revenues

Accounting:

• Accounting is called language of the business because it tells inner story of the business.

Accounting vs. book keeping:

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• Recording the information in the books is called book keeping.

• To draw a picture from the information is called accounting.

Accounting information system:

• A system that provides all information which is required to prepare financial statements
• It provides timely and accurate information.

Types of accounting:

• Financial accounting
• Managerial accounting
• Financial accounting is used by external user
• Managerial accounting is used by internal users.

Auditing:

• Systematic examination of accounting record.

Accounting vs. auditing:

• Accounting is concerned with recording of accounting information

• Auditing is concerned with examination of accounting information

Types of auditors:

Internal auditors:

• People who are working within the organization

External auditors:

• People who are not employees of the company.

User of financial information:

• Managers
• Employees
• Owners
• Investors
• Partners
• Banks
• Tax authorities
• Government

Prepared by: UMAR GHAFOOR

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GAAP- generally agreed accounting principles:

• Principles of accounting accepted all over the world.

Lecture 44:

Accounting equation:

Assets = liabilities + owner’s equity

Assets = liabilities

Liabilities are of two types:

• Liability towards owner

• Liability towards other parties

Assets:

• Cash or anything convertible into cash.

• Assets are owned by the company

Assets include:

• Cash
• Building
• Machinery
• Automobiles
• Automobiles
• Furniture
• Computers

Types of assets:

Tangible assets:

• Which can be physically touched

Intangible assets:

• Which cannot be physically touched

• Goodwill
• The reputation, business has earned over the years.

Liabilities:

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• All payables
• All claims and obligations against a company.

Liabilities include:

• Loan from banks

• Payable to suppliers
• Utility bills payables

Owner’s liability:

• Money invested by the owner of the business.

Owner’s equity:

• Right of the owner in the business.

Double entry system:

• Every transactions have two affects

• Debit
• Credit
• For every debit, there is always a credit
• For every credit, there is always a debit
• Debit and credit are always equal

Balance sheet:

• A sheet which shows balances of assets and liabilities

Balance sheet includes:

• Title
• Name of company
• Name of statement
• Period
• Asset side
• Liabilities and owner’s equity

Trial balance:

• A sheet in which we trial balances of ledger.

Trial balance errors:

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• If both sides of trial balance are equal, it does not mean that books of accounts are error
free.

Lecture 45:

Income statement:

• A statement which tells income or loss

• It is also called profit and loss account

Revenue vs. profit:

• Revenue is income
• Profit is obtained after deducting expenses from revenue.

Trading concern:

• An organization which buys goods for reselling

Finance:

• Thinking and considering for long term investments

• Generally revenues to pay back these investments
• To perform day to day activities of an organization.

Ratio analysis:

• Ratios tell us relationship among financial figures.

• These can be
• Relationships between current assets and current liabilities

Budgeting:

• A plan or an estimate for future expenses and revenues.

• It will be prepared before the start of the business.

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Prepared by: UMAR GHAFOOR