Topper's Checklist to Excel in Board Exams.

This checklist provides essential strategies for students aiming to score 95% and above. From understanding the syllabus to effective revision techniques, this guide covers all crucial aspects to help you excel:

1. Understanding the Syllabus and Blueprint

Before diving into studies, thoroughly understand the syllabus for each subject. This helps you identify the important topics and allocate your study time effectively. Syllabus has been simplified to check exact topics you have to do. Marginal learners may check the minimum learning topics.

Class 12 Accountancy Syllabus (2024-25) Simplified

Business Studies Simplified Syllabus Class 12 (2024-25)

Minimum Level Learning – Accountancy 12

Minimum Learning Topics in Business Studies

Blueprint of Accountancy Paper Class 12, 2024-25

Blueprint of Business Studies Paper Class 12 (2024-25)

2. Creating a Study Schedule

Develop a realistic and balanced study timetable. Allocate time slots for each subject, with more focus on weaker areas. You have enough time. Start with the difficult topics first. Don’t depend on others for this. Ensure you include breaks to avoid burnout.

3. Setting Clear Goals

Set specific, achievable goals for each study session. This could be completing a chapter, solving a certain number of problems, or revising key concepts. Set the topic or chapter to be done and maximum time duration for study not the minimum time duration for study.

4. Consistent Revision

Regular revision is crucial for retention. Plan periodic revisions and stick to the schedule. Revising previously studied material helps reinforce your understanding. Normally, you need to cover a topic three times, where successive reading becomes faster.

5. Practice with Past Papers

Solve previous years’ question papers to check the level of questions asked and the latest sample papers issued by the board for your desired level of preparation. This familiarizes you with the exam pattern, types of questions, and helps improve time management skills.

Accountancy Class 12 CBSE Question Papers

Business Studies Class 12 CBSE Question Papers

Accountancy Class 12 CBSE Sample Papers

Business Studies Class 12 CBSE Sample Papers

6. Taking Notes

Make concise notes while studying. Highlight important points, formulas, and dates. These notes will be invaluable for quick revision before the exams.

Check for keywords and brief notes in Business Studies that you can supplement further. Prepare brief notes for Accountancy on your own. Your active involvement in preparing notes will ultimately strengthen your memory.

7. Understanding Concepts

Focus on understanding the underlying concepts rather than rote memorization. A strong grasp of concepts makes it easier to tackle application-based questions. All articles here, have relevant interactive activities for checking the understanding of topics and concept clarity.

8. Regular Self-Assessment

Test yourself regularly with quizzes and mock exams. Identify your strengths and areas for improvement. Self-assessment helps track your progress and adjust your study plan accordingly. For more interactive activities and self-test exercises, follow Fun with Accountancy and Fun with Business Studies.

9. Healthy Lifestyle

Maintain a healthy lifestyle with a balanced diet, regular exercise, and adequate sleep. A healthy body supports a sharp mind, which is essential for effective studying.

10. Seeking Help When Needed

Don’t hesitate to seek help from teachers, friends, or online resources if you're struggling with a topic. Clarifying doubts promptly ensures smooth progression in your studies.

Common Mistakes in Accountancy Exam Class 12

Helpline

Examination Guidance for 12th Commerce

11. Staying Positive and Confident

Maintain a positive mindset and stay confident in your abilities. Avoid unnecessary stress and keep reminding yourself of your goals and the hard work you’ve put in.

12. Time Management During Exams

Develop a strategy for managing time during the exam. Allocate specific time for each section and stick to it. Ensure you have time for a final review of your answers. Howsoever well you have prepared, last minute glance on main points is must.

Refreshing During Study Time is Necessity

13. Relaxation and Breaks

Incorporate relaxation techniques like deep breathing, meditation, or short walks into your routine. Regular breaks help refresh your mind and maintain productivity.

14. Effective Use of Technology

Use educational apps, online tutorials, and e-books to supplement your studies. Technology can provide interactive learning experiences and additional practice resources. Make the best use of such Self-Learning Activities in Accountancy Class 12

By following this comprehensive checklist, you can systematically prepare for your board exams and aim for a score of 95% and above. Stay focused, stay disciplined, and success will be yours.

The post Topper’s Checklist to Excel in Board Exams. appeared first on Commerceatease - Website for 11th & 12th Commerce.

Though the board expects all students to prepare thoroughly and may put question from any corner of the syllabus, still some topics are in the ‘must’ list. These topics should be prepared thoroughly by all the students on priority basis, especially those who find it difficult to cope up with full syllabus.

In addition, calculations, concentrated reading of the question paper and proper presentation are required which cannot be overlooked.

Part -A

Fundamentals of Partnership

• Partnership Deed - Theory as well as in numerical type questions.
• Interest on Drawings - Rule, Calculation (all methods) and Treatment (Journal Entries).
• Interest on Capital - Rule, Calculation (Simple and Product methods) and Treatment (Journal Entries).
• Profit and loss Appropriation Account with all items.
• Past Adjustments (single and multiple errors).

Goodwill

• Meaning
• Factors generating goodwill
• Circumstances under which Goodwill is valued
• All methods of valuation of Goodwill

Change in Profit Sharing Ratio

• Sacrifice Ratio - Meaning
• Gaining Ratio - Meaning
• Calculation of Sacrifice and Gain
• Basic adjustment on Change in Profit Sharing Ratio

Admission of Partner

• New Profit-Sharing Ratio
• Treatment of Goodwill
• Revaluation of Assets/Liabilities
• Treatment of Reserves/ Accumulated Profits and Losses

Retirement and Death of Partner

• New Profit-Sharing Ratio
• Treatment of Goodwill
• Revaluation of Assets/Liabilities
• Treatment of Reserves/ Accumulated Profits and Losses
• Deceased Partner’s Capital Account and Executor Account

Dissolution of Partnership Firm

• Difference between Dissolution of Partnership and Dissolution of (partnership) Firm
• Preparation of Realization Account, Partners’ Capital Accounts and Bank Account
• Journal entries on Dissolution

Accounting for Share Capital

• Concepts of Share Capital
• Journal Entries - Simple cases
• Issue of Shares for Consideration other than cash (The most dependable).
• Showing Share Capital in Balance Sheet (Dependable with thorough understanding).

Accounting for Debentures

• Issue of Debentures consideration other than cash.
• Issue of Debentures with terms of issue and redemption.

Minimum Level Learning - Accountancy 

Part-B

Financial Statement of a Company and Analysis  

• Format of Balance-sheet with relevant legal provision
• Main heads and sub-heads of items of a Balance-sheet (Revise all previous years’ items first).
• Meaning of Operating Cycle, Current Asset, Current Liability
• Parties interested

Financial Analysis

• Meaning
• Types
• Tools
• Parties interested

Comparative and Common size Statements

• Preparation of Comparative Income Statement and Balance Sheet
• Preparation of Common-size Income Statement and Balance Sheet

Accounting Ratios

• Formula and significance of all ratios especially Current Ratio, Quick Ratio, Inventory Turnover Ratio, Gross Profit Ratio, Operating Ratio, Debt Equity Ratio, ROI.
• Effect of transaction on the ratios (especially above-mentioned ratios).
• Limitations of Ratio Analysis

Cash Flow Statement

• Meaning – detailed (with cash and cash equivalents)
• Meaning and identification of Operating, Investing and Financing Activities
• Transactions resulting in Cash Inflow/ Outflow or No flow.
• Simple Cash Flow Questions (Complete)

Project Work

• Prepare your Project file the best and original. Revise it thoroughly.
• Accounting year should be March 31, 2024 means data should be of 2022-23 and 2023-24.
• Prepare for Viva

Note: Some topics have been linked here to give you the summaries to save your time and effort.

How To Score 90 Percent in Board Exams?

Minimum Learning Topics in Business Studies

The post Minimum Level Learning – Accountancy 12 appeared first on Commerceatease - Website for 11th & 12th Commerce.

Achieving success in Business Studies Class 12 might seem daunting, but with the right strategies, you can make the best of your efforts and achieve great results efficiently.

There is no way anyone can suggest you achieve success without putting your efforts. Only the efforts made in right direction prove to be the shortest way to success.

Reading this article can take your five minutes. For complete guidance you need to read all linked articles, that can take another 40 -45 minutes. In total you need less than one hour for complete guidance relating to Business Studies. After that no one can stop you scoring full marks except you.

Here are the tips to help you succeed:

1. Understand the Syllabus:

Begin by thoroughly understanding the syllabus. Focus on the key topics that carry the most weight in the exams. Knowing what to prioritize will help you plan your studies better and save time.

You need to know the exact topics to be covered and check the article - Business Studies Simplified Syllabus Class 12 (2024-25)

2. Master the Basics:

Ensure you have a strong grasp of fundamental concepts. A solid understanding of the basics will make it easier to tackle more complex questions in exam.

Start from reading the basic terms in management, if you have yet to start preparing the subject - Basic Terms in Business Studies

3. Make a Study Plan:

Create a study schedule on your own that allocates time to each subject based on its importance and your comfort level. Stick to this plan diligently, making sure to cover all topics twice before the exams. Don’t use the study plan of others.

Check here for How you can finish syllabus from NCERT books - How to Study Business Studies from NCERT Books?

4. Use Quality Study Material:

Stick to NCERT textbooks and supplement them with reputable reference books. Quality material ensures you are studying accurate and relevant content, as per syllabus. It would save your time and effort also.

NCERT books are freely available to you on its website.

5. Practice sample papers:

Practice previous years' question papers and sample papers issued by CBSE. This will give you a sense of the exam pattern and the type of questions frequently asked.

Check here for CBSE sample papers and Previous years’ Question Papers - Business Studies Class 12 CBSE Sample Papers

6. Make Concise Notes:

While studying, make concise notes highlighting the key points. These notes will be extremely useful for quick revision before the exams. You can create small diagrams, cartoons, mind maps and mnemonics during this process, for thorough grasping and lasting memory.

7. Regular Revisions:

Schedule regular revision sessions to reinforce your learning. After covering NCERT books and preparing your own keynotes, go through the sample papers besides Sample papers issued by CBSE. Frequent revisions will reduce last-minute cramming.

Check here to take help for keywords and brief notes. - Business Studies Keywords Class 12

8. Practice Case Studies and MCQs:

Case studies are a significant part of Business Studies. First, learn the technique to solve case studies. Then, practice solving various case studies to improve your analytical and problem-solving skills.

Check here 70 case study questions in three articles (the other two articles have been linked in this article) to learn how to solve case studies. - 4 Super Tips to Solve Case Studies in Business Studies Class 12

To learn techniques to attempt MCQs, check - 7 Tips to Attempt MCQs

9. Seek Clarifications:

Once you thoroughly read the books as told, there won’t be any doubt. However, If you have any doubts or concepts that are unclear, seek help from your teachers or classmates. Clarifying doubts promptly ensures you don’t fall behind. If you have some general doubts, check - Helpline and Stress Management.

10. Stay Organized:

Keep your study materials, notes, and timetable well-organized. A tidy study space can help you stay focused and efficient. You only can manage your resources.

11. Take Responsibility:

Follow a healthy routine with adequate sleep, regular exercise, and balanced nutrition. Avoid all distractions. Believe in yourself and stay positive. Confidence and a positive mindset can significantly impact your performance.

By following these strategies, you can efficiently prepare for your Business Studies Class 12 exams.

In addition to strong preparation, you must know How to attempt Business Studies Exam. Many a times, students preparing well are not able to score good marks.

Consistency, focus, and smart work are the keys to unlocking your potential and excelling in your studies.

This is the only Shortest Way to Success in Business Studies Class 12.

Check Examination Guidance for 12th Commerce

If you are not able to get your problem solved even then, try sending e-mail to commerceatease37@gmail.com (as a last resort).

The post The Shortest Way to Success in Business Studies Class 12 appeared first on Commerceatease - Website for 11th & 12th Commerce.

Services are processes, not tangible products e.g. drinking a Coke is a service, but the bottle itself is not, Metro ride is a service, but the Metro train is not.

Services involve deeds, performances, and efforts, making them distinct from physical products.

Service Sector in India

India's economy is the seventh-largest globally by GDP and the third-largest by purchasing power parity (PPP). Classified as a newly industrialized country, it is part of the G-20 and BRICS. The IT industry is the largest private sector employer, while agriculture, although the largest employer overall, contributes only 17% to GDP. The Indian automobile industry is also among the world's largest.

Characteristics of Services / 5 ‘I’s of Services

1. Intangibility

Services cannot be seen, touched, held, or stored because they have no physical form. Customers can't buy physical ownership of experiences like entertainment, time like consulting, or processes like dry cleaning.

Due to this intangibility, services can't be examined before they are provided e.g. services include ticketing, babysitting, and schooling.

2. Simultaneity (Inseparability):

Production and consumption happen at the same time. The customer must be present, either going to the service provider like a hair salon or having the provider come to them like a plumber. This close contact means production and consumption can't be separated.

3. Heterogeneity (Inconsistency):

No two services are identical because they rely on human actions and interactions. There's no chance to fix a faulty service before it reaches the customer, making it hard to standardize quality.

4. Perishability (Inventory-less):

Services can't be stored for later use as they perish if not consumed. This leads to supply and demand issues e.g. an empty flight means lost revenue. Service providers often focus on managing demand.

5. Non-Ownership (Involvement):

Customers can't own a service because it isn't transferred from seller to buyer like a product. However customer must be involved in the use of services like a patient has to get treatment for doctor’s services, he cannot become owner of the doctor’s services.

Types of Services in Marketing:

1. On the basis of Service Operations to Volume of Customers:

Professional Service: Low volume e.g. accountant.

Service Shop: Medium volume e.g. bank hotel.

Mass Service: High volume e.g. transport.

2. On the basis of Level of Tangibility:

Services range from tangible-dominant to intangible-dominant.

3. On the basis of Customer-Employee Presence:

Self-Service: Only customer present e.g. ATM weighing machine.

Interpersonal Services: Both customer and employee present e.g. school hair salon.

Remote Services: Only employee present e.g. insurance company.

4. On the basis of Customization/Empowerment:

Low Customization/Low Empowerment: Food retailing superstore.

High Customization/Low Empowerment: Telebanking.

Low Customization/High Empowerment: Radiology service.

High Customization/High Empowerment: Accountant.

5. On the basis of service delivery and processing focus:

Services can be categorized by what they focus on and how they are delivered.

Processing Focus:

Body: Services aimed at physical aspects.

Mind: Services focused on mental aspects.

Tangible Assets: Services handling physical goods.

Intangible Assets: Services dealing with non-physical items.

Delivery System:

One-to-One Sequential: Individual step-by-step interactions e.g. Counselling.

One-to-One: Individual interactions e.g. Video games in an arcade.

One-to-Many: One provider multiple recipients e.g. Classroom lecture.

Criteria to Judge the Quality of Service:

1. Reliability:

Is the service dependable and accurate? e.g. Indigo Air flights are on time.

2. Access:

Is the service easy to access and delivered with little waiting? e.g. Haryana Roadways buses are accessible to everyone.

3. Security:

Is the service safe and free from risks? e.g. Air India ensures security measures.

4. Credibility:

Is the service provider trustworthy and honest? e.g. Indian Railways refunds money for waitlisted passengers.

5. Understanding the Customer:

Does the provider understand customer needs? e.g. Hindustan Unilever conducts market surveys.

6. Responsiveness:

Are employees willing to help and address problems? e.g. Rajasthan Roadways information booths.

7. Competence:

Do employees have the necessary skills and knowledge? e.g. Chartered Accountants are members of their professional institute.

8. Courtesy:

Are staff polite and considerate? e.g. Private sector employees are often polite.

9. Tangibles:

Are physical facilities equipment and materials well-presented? e.g. Waiters in clean uniforms.

10. Communication:

How well does the organization communicate? e.g. Rajasthan Roadways effectively communicates with passengers at Bikaner House Delhi.

Emerging Trends in Marketing

Online Marketing and Social Media Marketing

Internet Usage and Online Marketing in India. The young, dynamic population's use of Information Communication Technology (ICT) has led companies to shift to online marketing. India's online marketing is growing, with local content development and innovation becoming important.

Online Marketing - Meaning and Concept

Online marketing promotes products or brands through electronic media. It uses internet-based channels to spread messages about a company's brand, products, or services.

Unlike traditional marketing, online marketing allows real-time campaign analysis. Traditional marketing uses print, billboards, TV, and radio, while online marketing uses email, social media, SEO, and more.

Examples of Online Marketing

Canon: Advertises "photography" keywords on Google, Yahoo, and Bing.

Dove: Creates video ads and shares them on social media.

Whole Foods: Collects email addresses to advertise new products and events.

Advantages of Online Marketing

1. Brand Awareness: Increases brand visibility.
2. Measure Impact: Easily measures the effectiveness of channels.
3. Acquiring Valuable Customers: Identifies which channels acquire the best customers.
4. Use of Analytics: Determines cost-effective channels.
5. Better Medium: Identifies effective channels for repeat purchases.
6. Customer Analysis: Analyzes customer engagement and potential upsell opportunities.

Online Marketing Tools

1. Email Marketing
2. Social Media Marketing
3. Search Engine Optimization (SEO)
4. Display Advertising
5. Search Engine Marketing (SEM)
6. Events, Webinars
7. A/B Testing & Website Optimization
8. Content Marketing
9. Video Marketing
10. Marketing Analytics
11. Customer Relationship Management (CRM)
12. Content Management System (CMS)

Disadvantages of Online Marketing

1. Impersonal: Can feel impersonal due to virtual nature.
2. Competitive: Highly competitive environment.
3. Catching Attention: Hard to capture visitor attention due to many competing businesses.

Emerging Trends in Marketing

Social Media Marketing

Social media usage in India has grown rapidly, with 96 million internet users till date.

Social media marketing uses platforms to promote products or services and track campaign progress. It helps companies be accessible and visible to interested customers, targeting a range of stakeholders.

Popular Platforms for Social Media Marketing:

The most popular social media platforms used for marketing include:

1. Facebook: With over 3 billion monthly active users, it's a versatile platform for both organic reach and paid advertising.
2. Instagram: Known for its visual content, it's ideal for businesses that want to showcase products through photos and videos.
3. YouTube: The leading video-sharing platform, widely used for entertainment, education, and marketing.
4. TikTok: Famous for short, engaging videos, especially popular with Gen Z.
5. LinkedIn: A professional networking site, great for B2B marketing and connecting with professionals.
6. Twitter (X): Useful for real-time communication and sharing updates.
7. Pinterest: Popular for visual discovery and inspiration, especially for lifestyle and DIY content.
8. Snapchat: Engages a younger audience with its disappearing messages and creative filters.

Advantages of Social Media Marketing:

1. Brand Awareness:

Online marketing boosts brand awareness by promoting products and services. It also offers 24/7 online customer support, making customers feel valued.

2. Feedback:

Social media allows brands to receive both positive and negative feedback, helping them understand what works. Consumers commonly post feedback on social media, blogs, and websites.

3. Competitive Advantage:

Using internet platforms, businesses can gain an edge by creating channels for information. Social media helps identify customer behavior patterns and needs.

4. Impact:

Word-of-mouth and peer-to-peer communications have a stronger impact because they are seen as more genuine. Customers trust other customers' experiences more and social media facilitates these interactions.

Emerging Trends in Marketing

Promotion Mix

The post Emerging Trends in Marketing appeared first on Commerceatease - Website for 11th & 12th Commerce.

Meaning of Promotion

Promotion informs, persuades, and reminds the audience about the product, its price, and where to buy it. This includes using different marketing tools and methods. Promotion is crucial for any business to attract customers and boost sales.

Importance of Promotion

The importance of Promotion element of marketing mix lies in its following functions:

1. Information:

Tells customers about new products, services, or ideas and where to find them.

2. Persuasion:

Encourages customers to choose a specific brand among many.

3. Reminder:

Keeps customers aware of the brand and loyal, even during shortages. For example, Bourn Vita advertised during World War II despite being in short supply.

4. Relationship:

Builds lasting relationships with customers through consistent promotion and engagement.

5. Adds Value:

Influences customer perceptions to enhance value.

6. Supports Other Efforts:

Helps achieve company goals, assists sales teams, and boosts other marketing activities.

Elements of Promotion Mix

Promotion can be of two types:

Above-the-Line (ATL): ATL communications use the broadcast medium and print media to reach the mass audience.

Below-the-Line (BTL): BTL activities are targeted to a selective audience which might be present in a store or in a fair.

Elements of Promotion:

1. Advertising and Word-of –Mouth Communication
2. Sales Promotion
3. Direct marketing and online Marketing
4. Personal Selling
5. Public Relations and Sponsorship

1. Advertising and Word-of –Mouth Communication

Advertising: According to The American Marketing Association,” Advertising is any paid, non-personal promotion of ideas, goods, or services by an identified sponsor, with elements like payment, non-personal nature, identifiable source, and promoted items.”

It misses aspects like persuasiveness and media usage.

Word of mouth is important, with influencers playing a significant role. Customer conversations and reviews greatly influence purchasing decisions. In India, 90% seek post-purchase confirmation, increasing product utility and excitement.

Despite online platforms' popularity, most word-of-mouth communication is still offline.

2. Sales Promotion

According to The UK Institute of Sales Promotion, “Sales Promotion is any activity adding value to a product or service for a limited time by offering purchase incentives”. It is about providing extra benefits or value to prompt immediate purchases.

Sales promotion has become more popular than advertising due to its perceived value by consumers, effectiveness for dealers and distributors in boosting sales, and its ability to shift brand loyalty.

3. Direct marketing and online Marketing

Direct marketing involves advertising activities that create direct relationships between marketers and individual customers and includes curriculum, dialogue, personal, relationship, or database marketing.

The aim is to build lasting relationships with targeted consumers, using tools like direct mail, phone, and internet to generate immediate responses, such as orders or requests for information.

Online Marketing or E-commerce covers various online business activities for exchanging products and services. Here parties interact electronically rather than physically.

4. Personal selling

Personal selling is key part of the promotion mix, one of the 4Ps of marketing. It involves paid, two-way communication to persuade customers to buy products by providing information.

Direct selling, including telemarketing (selling over the phone), heavily relies on personal selling. This personalized approach helps build relationships and trust between the seller and the customer.

5. Public Relations and Sponsorship

Public Relations (PR) is a management function that assesses public attitudes, sets organizational policies and interests, and executes actions to gain public understanding and acceptance. The purpose is to create mutual understanding between marketers and target groups, building a positive public image.

Sponsorship, involves supporting events, activities, or organizations financially or with products/services to achieve business goals. A sponsor provides this support, aiming for commercial benefits.

Modes of Advertising

Importance and Objections of Advertising

Role/ Importance/Objective of Sales Promotion

(Same points can be used to write the importance or objectives, for objectives, write ‘To’ to start sentence).

1. Increased Trial:

Encourage existing customers to buy in bulk to boost sales volume.

2. Increasing Loyalty:

Maintain customer loyalty even if the product is not the cheapest or the best.

3. Widening Usage:

Inform users of additional uses for the product.

4. Creating Interest:

Use inventive and stylish promotions, new product offers, celebrity endorsements, or engaging activities to attract attention.

5. Creating Awareness:

Make people aware of the product through joint promotions with well-known products or services, alongside advertising.

6. Deflecting Attention from Price:

Avoid price wars that can harm profitability.

7. Gaining Intermediary Support:

Develop programs for wholesalers, retailers, agents, and distributors to encourage distribution, display, cooperative advertising, and customer introduction.

8. Discriminating Among Users:

Offer early booking discounts and special benefits to motivate specific customer groups.

9. Restoring Brand Perceptions:

Offer special promotions to customers who complain, to restore brand perception and loyalty after mishandling their accounts.

Types of Sales Promotion

Various Tools/Techniques/Tactics used for Sales Promotion are:

1. Price Promotions:

a) Extra Fill Packs:

Offering extra product quantity for the same price.

E.g. Airtel Mobile Recharge Plans: Offers like "Talk Unlimited 3599" provide 2.5GB/day data and additional benefits like 1 year of Prime Video Mobile and Apollo 24|7 Circle for the same price.

b) Free Offers

Providing an additional unit of the product for free when purchasing a specified amount.

E.g. GrabOn Free Samples: Websites like GrabOn offer free samples of various products, such as body scrubs and hair oils, when you make a purchase above a certain amount.

c) Reduced Shelf Price

Offering a product at a lower price than its usual shelf price.

E.g. Big Bazaar Sales: Regular sales events where products are sold at significantly reduced prices compared to their original shelf prices.

d) Reduced Price Offers (RPOs)

Flashing an offer on the packaging, showing a saving or a slashed price.

E.g. Flipkart: Flash sales on Flipkart often offer substantial discounts on various products, such as "50% off on selected electronics."

e) Cash Rebates

Offering cash back to customers when they collect and send in tokens from product packs.

E.g. Amazon: Amazon often provides cashback offers on purchases, where customers can get a percentage of their purchase amount back as a cash voucher.

f) Cash Share-Out

Dividing a fixed sum of money among customers who return proof of purchase.

E.g. HDFC Bank: Offers where customers can earn cashback on certain transactions and share the rewards with friends or family.

g) Discounts

Offering a lower price than usual through discount coupons.

E.g. Coupon Websites: Websites like CouponDunia offer discount coupons for various products and services, such as "Get 20% off on your next purchase."

h) Repurchase Offers

Offering to buy back consumer durables at a specified price in the future.

E.g. Maruti Suzuki: Offers a buyback program where customers can trade in their old car for a new one at a discounted price.

i) Frequent-user Incentive

Providing benefits to frequent users, such as free miles for upgrades.

E.g. IndiGo Airlines: Frequent flyer programs where members can earn miles for free upgrades or other benefits.

j) Coupons

Distributing coupons that offer discounts on future purchases.

E.g. Grocery Stores: Supermarkets like Big Bazaar and DMart often distribute coupons that offer discounts on future purchases.

k) Sale

Marking items as "on sale" to attract more customers.

E.g. Shoppers Stop: Seasonal sales where items are marked as "on sale" to attract more customers, even if the price reduction is minimal.

l) Finance Deals

Offering low-interest or interest-free financing options.

E.g. Bajaj Finance: Offers low-interest financing options for purchasing consumer durables like refrigerators and washing machines.

Prize Promotions: Prize Promotions include free prize draws, sweepstakes, and competitions.

a) Free Prize Draws (and Lotteries)

Names of all entrants are put into a system, and winners are chosen randomly.

E.g. Big Bazaar's "Sabse Saste Din" offers where customers can enter a draw to win prizes during special sales events.

b) Sweepstakes/Games

A contest where prizes are distributed based on randomly selected winning tickets. Participants have no control over the outcome.

E.g. Pepsi's "Pepsi T20 Cricket Contest", where consumers could win prizes by entering a code found on Pepsi bottles.

c) Competitions

A contest where winners are determined based on skill.

E.g. Google India Code to Learn Contest, where students showcase their coding skills to win prizes.

3. Premium Promotions

This is sales promotion strategy where the benefit is accompanied by an additional item of merchandise.

a) On-packet Offers:

Additional items are included directly with the main product packaging.

E.g. Buy a shampoo and get a small conditioner bottle attached to it.

b) With Purchase Premiums:

Customers receive a premium item when they make a purchase.

E.g. Buy two shirts, get a tie for free.

c) Free Mail-Ins:

Customers can mail in a proof of purchase to receive a free item.

E.g. Mail in receipts for five cereal boxes to get a free bowl.

d) Partner Promotions:

Promotional items are provided in collaboration with another company.

E.g. Buy a McDonald's meal and get a free toy from a popular movie.

e) Tailor-Made Offers:

Customized promotions based on customer preferences or purchase history.

E.g. Loyalty program members receive personalized offers or gifts based on their past purchases.

4. Off-the-Shelf Offers:

a) Free Accommodation:

Particularly for the hotel industry, the offer now extends to “two nights for the price of one.”

b) Holiday Vouchers:

Some companies provide cash discounts, traveler cheques, duty-free shopping vouchers, etc.

c) Discount Coupons:

In India, firms like Snapdeal.com offer discount coupons that can be redeemed for health and beauty, entertainment, adventures, mobiles, apparel, lifestyle, electronics, and travel categories.

d) Two-for-One Flights:

Budget airlines often provide this facility.

e) Insurance Offers:

Car manufacturers often provide free insurance for the first year as part of sales promotions during slack seasons.

5. Hybrid Sales Promotion:

Many companies from different countries try to improve their image through trade fairs.

Differences Between Advertising and Sales Promotion

1. Origin:

Advertising comes from the Latin word "advertere" (to turn towards).

Promotion comes from "pomovere" (to move forward).

2. Purpose:

Advertising aims to build a positive brand attitude long-term.

Promotion aims for short-term sales boosts.

3. Method:

Advertising provides information or creates feelings to influence potential action.

Promotion directly motivates with immediate incentives.

4. Duration:

Advertising focuses on long-term goals.

Promotion targets short-term results.

5. Cost:

Advertising is generally more expensive.

Sales promotion is cheaper.

6. Target Audience:

Advertising is suitable for medium to large firms.

Sales promotion is suitable for large firms.

7. Objectives:

Advertising aims to increase sales and build brands.

Sales promotion provides additional knowledge and has a direct impact on sales.

8. Effect:

Advertising indirectly assumes increased sales.

Sales promotion directly affects sales.

9. Medium:

Advertising uses newsprint, TV, radio, and outdoor publicity.

Sales promotion uses discount coupons, free samples, tastings, contests, events, etc.

10. Speed of Results:

Advertising results are slower.

Sales promotion results are faster.

11. Examples:

Advertising: A TV ad listing features of Intex cell phones.

Sales Promotion: HUL giving free tubes of Close-Up toothpaste.

Differences Between Personal Selling and Sales Promotion

1. Objective:

Personal Selling: Aims to create awareness and build long-term relationships, leading to closing sales.

Sales Promotion: Focuses on increasing sales and clearing stocks quickly.

2. Interaction:

Personal Selling: Involves face-to-face interactions to provide product information and foster long-term relationships.

Sales Promotion: Does not involve direct interaction but uses incentives to encourage purchases and share information.

3. Incentives:

Personal Selling: May include negotiations but incentives are not mandatory.

Sales Promotion: Always includes incentives to attract customers.

4. Product Type:

Personal Selling: Suitable for high-value, complex, or custom-made products.

Sales Promotion: Ideal for low-value, easy-to-understand products.

5. Market:

Personal Selling: Used in markets with fewer potential customers or those with high purchasing power.

Sales Promotion: Effective in markets with many customers and lower-value products.

6. Cost:

Personal Selling: More expensive due to sales force training, dedicated personnel, repeated visits, and transportation.

Sales Promotion: Generally, less expensive compared to personal selling.

Promotion Mix

Factors Affecting the Selection of Promotion Mix

1. Push and Pull Strategies:

The goal of promotion is to motivate and persuade not only consumers but also intermediaries who make goods available to consumers.

A push strategy focuses on persuading intermediaries to promote products, emphasizing personal selling along with advertising and trade promotions. Manufacturers promote goods to wholesalers, who then promote them to retailers, and retailers to consumers.

A pull strategy emphasizes consumer demand. If consumers demand particular goods from retailers, retailers will request those goods from wholesalers, who will then ask manufacturers. This strategy works well during recessions.

Marketing managers must decide whether to use a push or pull strategy, or a combination of both.

2. Product Features:

The use of a specific promotion mix tool depends on the type of product.

Industrial products require more personal selling, while consumer products like HUL's Axe need more advertising.

Image-oriented products, like fashion garments, may need the presence of designers or celebrities in-store. Products with minimal feature differences benefit from more sales promotions.

Seasonal products need off-season sales, but year-round advertising is also necessary. High-priced products require personal selling to mitigate risks, while low-convenience goods rely more on advertising. Products like Viagra, condoms, and hair color for senior citizens need more advertising due to customer sensitivity.

3. Stage of the Product Life Cycle:

Different promotion mix tools are effective at different product life cycle stages.

During the introductory stage, heavy advertising and free samples help create awareness.

In the growth stage, advertising increases while sales promotions decrease as consumers become aware of the product's benefits.

During the maturity stage, sales promotions are crucial to switch customers from competitors.

In the decline stage, the focus is on maximizing revenue, with reduced promotional expenditures.

4. Buyer Readiness:

When customers are unaware of a product, advertising and public relations are more important.

As they approach the decision-making stage, sales promotion and personal selling become crucial.

5. Type of Buyer:

Organizational or business buyers are influenced by specialized ads and personal selling, while consumers respond to glossy advertisements and celebrity endorsements.

6. Type of Distribution:

Intensive distribution requires heavy advertising and sales promotion.

Selective distribution may have a varied promotion mix, while exclusive distribution of high-end products like Rado watches needs more personal selling.

7. Promotion Objectives, Budget, Cost, and Availability of Media:

Promotional objectives align with overall marketing goals. Mass awareness campaigns use advertising, sales promotion, and public relations. To invite customers to stores for demonstrations, a combination of small-scale advertising, sales promotion, and personal selling is effective.

The promotion mix is also influenced by the budget. Small budgets focus on personal selling, while larger budgets use regional and national media.

The cost of promotional tools and media availability also play roles. For example, tobacco and alcohol advertising is banned on TV in India, and some ads are not permitted if they disrespect cultural values.

8. Digital Dimension:

The rapid access to information through digital media requires marketers to understand and leverage digital platforms effectively.

9. Elections:

Companies often use election time to promote low-priced products. However, some avoid increased distribution due to potential mismanagement and political ad competition.

Companies like Tata Global and Hero MotoCorp plan to push low-priced products during elections, while others like Parle and Dabur do not increase distribution efforts.

Functions of Intermediaries in Distribution Channels

Emerging Trends in Marketing

The post Promotion Mix appeared first on Commerceatease - Website for 11th & 12th Commerce.

Manufacturer will not be able to reach to consumers without the intermediaries like wholesalers and retailers in between.

Wholesalers

Wholesalers connect manufacturers with retailers by buying in bulk and selling in smaller lots. They play a crucial role in distributing products efficiently from producers to retailers or industrial users.

Functions Of Wholesalers

1. Buying and Selling:

Estimate demand, purchase various goods from manufacturers, and sometimes import goods.

2. Storage:

Keep purchased goods in warehouses for later supply to retailers, aiding both manufacturers and retailers.

3. Transportation:

Arrange transport of goods from manufacturers to their warehouses and then to retail stores.

4. Grading and Packing:

Grade goods by standards, possibly adding brand names, and pack them in convenient lots.

5. Financing:

Provide financial help to manufacturers by buying goods on cash or giving advances and retailers by selling on credit.

6. Risk-taking:

Bear risks like price changes, demand fluctuations, spoilage, and bad debts.

7. Promotion:

Assist in advertising and sales promotion activities for retailers.

Retailers

Retailers have special importance in the channel of distribution connecting the wholesalers and ultimate consumers.

Function of Retailers

Their main functions are:

1. Collection of Goods:

Retailers buy goods from various wholesalers and manufacturers to supply to consumers.

2. Time Utility:

They stock a variety of products and sell them whenever customers need them.

3. Transportation:

Retailers transport goods from wholesalers to consumers and sometimes offer free home delivery.

4. Financing:

They sell goods on credit, increasing consumers' buying power but taking on the risk of bad debts.

5. Customer Education:

Retailers inform customers about new products and demonstrate their uses.

6. Spokesperson for Customers:

They communicate customer needs to wholesalers and manufacturers, helping improve product offerings.

Difference between Wholesaler and Retailer

Wholesaler and Retailer can be distinguished as under:

1. Wholesaler buys and sells goods in large quantities.

Retailer resells in small quantities and operates on a small scale.

2. Wholesaler handles a limited number of items and varieties.

Retailer offers a wide range of items and varieties.

3. Wholesaler acts as the first link in the distribution chain.

Retailer acts as the second link in the distribution chain.

4. Wholesaler sells products to retailers and industrial users.

Retailer directly sells to consumers.

5. Wholesaler receives goods directly from manufacturers.

Retailer gets goods from wholesalers and sometimes manufacturers.

6. For wholesaler shop location is not crucial.

For retailer shop location near residential areas is crucial.

7. For wholesaler window displays are not important.

Retailer must have attractive window displays to attract customers.

8. Wholesaler operates on low profit margins but with fast turnover.

Retailer charges higher prices to cover display costs and higher rent in central locations.

9. Wholesaler does not offer after-sale services.

Retailer provides after-sale service.

Functions of Intermediaries in Distribution Channels

Factors Affecting the Selection of the Channel of Distribution

Whether the business will directly sell to the ultimate consumers, or through wholesalers and retailers or through an agent also, will be affected by various factors as follows:

Product Related Factors:

1. Price: Low-priced products have longer distribution chains, high-priced products have shorter chains.
2. Perishability: Perishable goods need fewer intermediaries, often sold by retailers.
3. Size and Weight: Heavy goods are usually directly distributed by producers.
4. Technical Nature: Products needing instructions are sold with fewer intermediaries.
5. Made to Order: Custom products are sold directly, standardized items through intermediaries.
6. After-Sales Service: Products needing after-sales service are sold directly or via authorized agents.

Consumer Related Factors:

1. Number of Customers: More customers require intermediaries; fewer customers may be served directly by manufacturers.
2. Geographic Spread: Widely spread customers need wholesalers and retailers.
3. Order Size: Bulk orders are handled directly by producers; small orders by wholesalers.
4. Purchase Objective: Industrial purchases are sold directly; general consumption goods pass through many hands.
5. Credit Facilities: Products needing credit sales often involve wholesalers and retailers.

Middlemen Related Factors:

1. Services Provided: Choose middlemen based on the services they offer, especially for new product promotion.
2. Sales Potential: Select channels that promise higher sales.
3. Alignment with Policies: Prefer middlemen who follow the producer's policies.
4. Distribution Costs: Try to opt for the most cost-effective distribution channels.

Company Related Factors:

1. Production Level: Large producers with more resources use fewer intermediaries; smaller producers use more.
2. Financial Resources: Wealthier companies need fewer middlemen.
3. Managerial Experience: Less experienced producers rely more on middlemen.

Other Factors:

1. Competitors' Channels: Consider competitors' distribution methods.
2. Social Viewpoint: Keep societal attitudes towards distribution in mind.
3. Flexibility: Ensure the ability to change agents if needed.

Types of Distribution Channels Class 12

Promotion Mix

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Question: 1

Higher Debt Equity Ratio results in:

(a) Higer degree of operating risk

(b) Higer degree of financial risk

(c) Lower Degree of financial risk

(d) Higher earning

Answer: (b) Higer degree of financial risk

Question: 2

A person buys 600 shares of Trustworthy Industries at a price of ₹ 2200 per share. After a year the market price of the share is ₹ 2,600. How much wealth this shareholder will have in the company?

(a) ₹15,00,000

(b) ₹13,20,000

(c) ₹12,00,000

(d) ₹15,60,000

Answer: (d) ₹15,60,000

Question: 3

Financial leverage is called favourable if:

(a) Debt is more than the share capital

(b) Return on investment is higher than the cost of debt

(c) Return on investment is less than the cost of debt

(d) Return on investment is the same as that of cost of debt.

Answer: (b) Return on investment is higher than the cost of debt

Question: 4

Keerti Ltd. has Debt Equity ratio of 2:1 whereas Paali Ltd. has Debt Equity ratio of 1:1. Name the advantage Keerti Ltd will have over Paali Ltd, when their ROI is more than the Cost of Debt.

(a) Trading on equity

(b) Low risk

(c) Low cost of equity

(d) Greater flexibility.

Answer: (a) Trading on Equity

Question: 5

Moonlight Ltd., dealing in fancy lights, is planning to expand its business operations and decides to set up one more production unit at Ludhiana. For this purpose, the company needs additional funds ₹60,00,000. The company wishes to raise the required funds by issuing Debentures. The debt can be issued at an estimated cost of 12%. The EBIT for the previous year of the company was ₹ 10,00,000, and the total capital investment was ₹ 1,00,00,000.

As a Financial Manager, suggest whether the company should go for issuing Debentures. Give reasons to justify your answer.

Answer: ROI = EBIT/Total Capital = (10,00,000/1,00,00,000) = 10%

Cost of Debt > Return on Investment (COD > ROI)

No, the Cost of Debt 12% is more than ROI which is 10%.

Company should issue Debentures only when Cost of Debt is lower than Return on Investment. If company issues Debentures in the present situation, Earning Per Share (EPS) will decrease, ultimately going against the shareholders of the company.

Practical Problems on Trading on Equity Class 12

Question (Case Based): 6

Read the following and answer the questions that follow:

Moonlight Ltd., dealing in Sports Equipment, is planning to expand its business operations and decides to set up one more plant at Jallandhar. For this purpose, the company needs additional funds ₹70,00,000. The company wishes to raise the required funds by Equity Shares. But the debt can be issued at an estimated cost of 9%. The EBIT for the previous year of the company was ₹ 12,00,000, and the total capital investment was ₹1,00,00,000. The financial manager of the company would normally opt for a source which is the cheapest.

Choose the correct option in the following parts:

Part 1: What is the other name of long-term decisions in this case?

(a) Capital Budgeting

(c) Financial management

(b) Gross working capital

(d) Working Capital

Part 2: A decision to set up one more plant:

(a) Financing decision

(c) Investment decision

(b) Working capital decision

(d) None of the above

Part 3: A decision for raising fund of ₹ 70,00,000 either from 9% Debentures or Equity Shares is a:

(a) Financing decision

(c) Investment decision

(b) Dividend decision

(d) None of the above

Part 4: The financing decisions are affected by various factors. Which one of the following factor is discussed in the above case?

(a) Cash Flow Position of the Company

(b) Amount of Earnings

(c) Cost

(d) Taxation Policy

Answers:

Part 1: (a) Capital Budgeting

Part 2: (c) Investment decision

Part 3: (a) Financing decision

Part 4: (c) Cost

Question: 7

The Return on Investment (Rol) of a company ranges between 10% to 12% for the past three years. To finance its future fixed capital needs, it has the following options for borrowing debt.

Option ‘A’: Rate of interest 13%

Option ‘B’: Rate of interest 9%

(a) Which source of debt, ‘Option A’ or ‘Option B’, is better? Give reason in support of your answer.  (b) State the concept being used in taking the decision.

Answer:

(a) The company should use ‘Option B’ as in this case the Return on Investment (10 - 12%) will be more than the Cost of Debt (9%).

(b) The concept being used in the above case is ‘Trading on Equity’.

Question: 8

A company raised funds by raising debt @12% for ₹15 lakhs. Rate of income tax is 40%. It’s ROI is 15%.

(a) Calculate effective Cost of Debt.

(b) Is company’s Capital Structure bringing gains to its shareholders?

Answer: (a) Effective cost of debt = 7.2%             [ Saving of 40% Tax on Interest 12%]

= 12% - 40% of 12% = 12% - 4.8% = 7.2%

(b) Yes, Capital Structure is good and resulting net gain to the shareholders as ROI is more than its Cost of Debt.

Question: 9

Teenu Ltd. has equity share capital of ₹10,00,000 (Face Value ₹10 each). Its earnings before Interest and Taxes are ₹1,50,000. The company needs ₹5,00,000 for Research and Development Project. The prevailing Tax rate is 30%. It has decided to go for Debt which is available in the market @ 9% p.a. Should the company proceed with its plan? Give reasons.

Answer: The company should go for Debt financing as company’s ROI is 1,50,000/10,00,000 = 15%, which is more than the Cost of Debt i.e. Rate of Interest which is 9% only. This will give net gain to the shareholders i.e. increase of Earning per share (EPS).

Question: 10

Beebo Ltd. is a company manufacturing traditional carpets. It has a share capital of ₹60 lakh, the face value of share being ₹10 each. The earning per share in the previous year was ₹0.50. For increasing its exports, it needs to pump in more funds for additional machinery of ₹40 lakh. The company raised funds by issuing 10% Debentures for the same. During the current year the company earned a profit of ₹8 lakh on capital employed. It paid tax 40%.

State whether the shareholders gained or lost, in respect of earning per share, as a result of extended business operations for increasing exports. Show your working clearly.

Answer: EBIT = ₹8,00,000

Less Interest = 10% on ₹40,00,000 = 4,00,000

Earnings before Tax = 8,00,000 – 4,00,000 = 4,00,000

Less Tax = 40% of 4,00,000 = 1,60,000

Earning After Tax = 4,00,000 – 1,60,000 = 2,40,000

Earning Per Share = (2,40,000/6,00,000) = ₹0.40 per share.

Thus, the shareholders have lost wealth as earning per share (EPS) has decreased from ₹0.50 to ₹0.40 i.e. by ₹0.10.

Practical Problems on Trading on Equity Class 12

Question: 11

Ganga Ltd. is a manufacturer of steel utensils at S.A.S.Nagar. The company wants to set up a new plant at Chandigarh also. The company will require ₹600 crore to set up the new plant. The company decides to issue Equity Shares for ₹170 crores (of ₹100 each), issue 9% Debentures for ₹230 crore (of ₹1,000 each), arrange long term Loans from banks for ₹80 crores, attract Public Deposits for ₹50 Crores and utilise reserves and surpluses for the remaining amount (available).

(a) What is the capital structure of this company? Explain.

(b) Identify the financial decision when the company decides to raise ₹600 crores from different long-term sources.

Answer: Capital structure consists of owners' funds and borrowed funds i.e. Debt and Equity.

It is = Debt/Equity

In this case the Debt = Debenture + Long term loans + Public Deposits

=230 + 80 + 50 = 360 crores

Equity = Equity Share Capital + Reserves and Surplus

= 170 + 70 = 240 Crores

So, Debt/Equity = 360/240 = 1.5:1

Question: 12

Moonlight Ltd., dealing in Sports Equipment, is planning to expand its business operations and decides to set up one more plant at Jallandhar. For this purpose, the company needs additional funds ₹ 70,00,000. The company wishes to raise the required funds by Equity Shares. But the debt can be issued at an estimated cost of 9%. The EBIT for the previous year of the company was ₹12,00,000, and the total capital investment was ₹ 1,00,00,000. The financial manager of the company however is advising to opt for a source which is the cheapest.

Analyse this situation and clear the position of Finance Manager. Is he right in suggesting that particular source of funds? Elaborate your answer.

Answer: ROI = EBIT/Total Capital = (12,00,000/1,00,00,000) = 12%

Cost of Debt < Return on Investment (COD < ROI)

Cost of Debt 9% is less than ROI which is 12%.

Company should issue Debentures when Cost of Debt is lower than Return on Investment.

If company issues Debentures in the present situation, Earning Per Share (EPS) will increase, ultimately going against the shareholders of the company.

Financial Manager is absolutely right in giving his advice of issuing the cheapest source i.e. 9% Debentures in this case.

Question: 13

PT Garments Ltd. wants to raise funds of ₹ 50,00,000 for its new project. The management is considering the following alternate mix of Debt and Equity to raise this amount:

Capital Structure                 Situation I (₹)       Situation II (₹)    Situation III (₹)                       

Equity                                     50,00,000                        20,00,000                  30,00,000

Debt                                               Nil                                30,00,000                  20,00,000

Other details are as follows:

Interest Rate on Debt: 9%

Face Value of Equity Shares: ₹100 each

Tax Rate: 40%

Earning Before Interest and Tax (EBIT):    ₹ 12,00,000

Under which of the three situations will the company be able to take advantage of Trading on Equity?

Answer: First of all, EPS will be calculated in all the situations:

Situation I

EBIT = ₹ 12,00,000

Tax = 40% on 12,00,000 = 4,80,000

Earning After Tax = 12,00,000 – 4,80,000 = 7,20,000

EPS = 7,20,000/50,000 = ₹ 14/40

Situation II

EBIT = ₹ 12,00,000

Interest = 9% on 30,00,000 = 2,70,000

Earning after Interest = 12,00,000 – 2,70,000 = 9,30,000

Tax = 40% on 9,30,000 = 3,72,000

Earning After Tax = 9,30,000 – 3,72,000 = 5,58,000

EPS = 5,58,000/20,000 = ₹ 27/90

Situation III

EBIT = ₹12,00,000

Interest = 9% on 20,00,000 = 1,80,000

Earning after Interest = 12,00,000 – 1,80,000 = 10,20,000

Tax = 40% on 10,20,000 = 4,08,000

Earning After Tax = 10,20,000 – 4,08,000 = 6,12,000

EPS = 6,12,000/30,000 = ₹ 20/40

The company can take advantage of Trading on Equity in situation II as EPS is more in this case than situation III. (and highest in all situations taken together. i.e. ₹27/90).

Practical Problems on Trading on Equity Class 12

Question: 14

BTS Garments Ltd. wants to raise funds of ₹ 50,00,000 for its new project. The management is considering the following alternate mix of Debt and Equity to raise this amount:

Capital Structure             Situation I (₹)                 II (₹)                      III (₹)                    

Equity                                      20,00,000                        30,00,000              10,00,000

Debt                                          30,00,000                       20,00,000              40,00,000

Other details are as follows:

Interest Rate on Debt: 9%

Face Value of Equity Shares: ₹ 100 each

Tax Rate: 40%

Earning Before Interest and Tax (EBIT) : ₹12,00,000

As a Financial Manager, which situation is the Optimum Capital Structure to be suggested to the company? Justify your answer with reasons.

Answer: First of all, EPS will be calculated in all the situations:

Situation I

EBIT = ₹12,00,000

Interest = 9% on 30,00,000 = 2,70,000

Earning after Interest = 12,00,000 – 2,70,000 = 9,30,000

Tax = 40% on 9,30,000 = 3,72,000

Earning After Tax = 9,30,000 – 3,72,000 = 5,58,000

EPS = 5,58,000/20,000 = ₹ 27/90

Situation II

EBIT = ₹12,00,000

Interest = 9% on 20,00,000 = 1,80,000

Earning after Interest = 12,00,000 – 1,80,000 = 10,20,000

Tax = 40% on 10,20,000 = 4,08,000

Earning After Tax = 10,20,000 – 4,08,000 = 6,12,000

EPS = 6,12,000/30,000 = ₹ 20/40

Situation III

EBIT = ₹12,00,000

Interest = 9% on 40,00,000 = 3,60,000

Earning after Interest = 12,00,000 – 3,60,000 = 8,40,000

Tax = 40% on 8,40,000 = 3,36,000

Earning After Tax = 8,40,000 – 3,36,000 = 5,04,000

EPS = 5,04,000/10,000 = ₹ 50/40

Conclusion for answer:

The company can take advantage of Trading on Equity in situation I as EPS is ₹ 27/90 which is more in this case than situation II.

Though the highest EPS in all situations taken together is in situation III i.e. ₹ 50/40, this Capital Mix is not advisable, as the position of the company will be too risky. Debt Equity Ratio is also 4:1 which in this case is more than 2:1

Before doing Practical Problems on Trading on Equity, students must understand this concept well.

Trading on Equity

Financial Management – Notes

Learning Games and Activities in Business Studies Class 12

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Two main types of distribution channels are:

A. Direct Channel

B. Indirect Channel

A. Direct Channel (Zero level):

Manufacturers --> Consumers

This is the simplest and shortest mode of distribution. There’s a close connection between the manufacturer and the consumer.

The manufacturer sells directly to the consumer without intermediaries. It can be Direct Selling i.e. providing products through the company's own retail outlets and sales staff, like McDonald's or by direct delivery to the customer, either in person or via mail.

Mail order selling involves getting orders from customers who respond to ads or direct mail, and then shipping the product to them.

B. Indirect Channel

In an indirect channel, manufacturers use intermediaries like wholesalers and retailers to sell products to consumers. Each intermediary adds to the cost by taking a share of the profits.

This method is useful for large producers needing to reach many small retailers, making large-scale distribution more efficient.

Indirect Channels can be:

1. One level channel:

Manufacturer --> Retailer --> Consumer

In One level channel, only one intermediary is involved. The manufacturer supplies goods directly to retailers, who then sell to end consumers.

The producer regularly checks retailers' needs and supplies goods accordingly. Retailers can also pick up goods from the producer's warehouse if needed e.g. Maruti Udyog sells its cars through approved retailers.

2. Two levels channel:

Manufacturer --> Wholesaler --> Retailer --> Consumer

In two level channel the manufacturer supplies products in bulk to wholesalers. Retailers then buy from wholesalers and sell to local consumers. This setup, involving both wholesalers and retailers, is FMCG being sold through big retailers like BIG BAZAAR.

This is the most common channel adopted for consumer goods

3. Three levels channel:

Manufacturer --> Agents --> Wholesaler --> Retailer --> Consumer

Three-Level Channel involves three intermediaries: mercantile agents, wholesalers, and retailers. The manufacturer sells to mercantile agents, who sell to wholesalers, who then sell to retailers, and finally to consumers.

It is useful for manufacturers with limited product lines needing to cover a wide market.

Marketing Intermediaries are middlemen, that facilitate the flow of goods from manufacturer to consumer.

Types of Marketing Intermediaries:

a) Agents: Represent producers, earn commissions, but don't own products (e.g., travel agents).

b) Wholesalers: Buy in bulk, own products, and sell to retailers for profit.

c) Distributors: Similar to wholesalers but carry complementary products and maintain close relationships with suppliers and customers.

d) Retailers: Sell directly to end users, can be small independent stores or large chains.

Intermediaries are crucial for efficient product distribution and can vary depending on the product type.

Types of Distribution Channels Class 12

Functions of Intermediaries in Distribution Channels

Channel of Distribution Meaning and Functions Class 12

The post Types of Distribution Channels Class 12 appeared first on Commerceatease - Website for 11th & 12th Commerce.

Introduction

Product and pricing are crucial, but ensuring the product reaches the right place at the right time is equally important. Success depends on effective distribution of the product as all marketing activities revolve around the customer.

Place or Channel of Distribution

Place refers to the process of moving products from the producer to the user. It includes channels like intermediaries, distributors, wholesalers, and retailers.

Place is also called channel of distribution, or intermediary.

According to Philip Kotler, “Every producer seeks to link together the set of marketing intermediaries that best fulfil the firm’s objective. This set of marketing intermediaries is called marketing channel.”

'Channel of Distribution' refers to the path taken by goods from the Manufacturer to the consumer. It’s concerned with the transfer of title to a product which may be affected directly or through a chain of intermediaries.

Four participants of distribution system:

(1) Manufacturers: who produces the goods.

(2) Intermediaries: they perform various functions like buying, selling, assembling etc.

(3) Facilitating agencies: independent agencies that facilitate the smooth distribution of goods from producers, through intermediaries, to consumers like banking institutions, insurance companies, and transportation agencies and warehousing companies.

(4) Consumers: the final destination, who uses the goods to satisfy their needs and wants.

For consumer goods, manufacturers often operate from remote locations while consumers are spread out geographically.

Goods reach consumers through intermediaries like retailers, wholesalers, distributors, warehouses, and increasingly, the Internet. These intermediaries form the 'place' aspect of the marketing mix by moving, stocking, and selling goods.

Channel of Distribution Meaning and Functions Class 12

Functions of Channels of Distribution

Channels of distribution help in smooth flow of goods by creating possession, place and time

utilities. The functions performed by them are grouped into three categories:

1) Transactional Functions

2) Logistical Functions

3) Facilitating Functions

1) Transactional Functions:

The main role of a distribution channel is to bridge the gap between production and consumption. This involves transactional functions like buying, selling, and risk-bearing. Producers sell goods to intermediaries who then sell to consumers.

Risk is also part of this process. Thus, all channel participants must accept the risk of potential loss.

2) Logistical Functions:

Logistical functions involve the physical exchange of goods. Producers make and assemble goods from different locations, then store, grade, sort, and transport them.

Assembling: Goods bought from various places are kept together.

Storage: Proper storage prevents loss or damage and ensures a steady supply.

Grading and Packing: These processes help in handling and selling goods quickly.

Transportation: Makes goods available to buyers wherever they are.

All these functions ensure goods reach the market on time and are conveniently sold to consumers.

3) Facilitating Functions:

Facilitating functions enhance both transactions and the physical exchange of goods. These include services like post-purchase maintenance, financing, and market information.

Sellers offer necessary details to buyers, provide after-sales services, and sometimes offer credit sales. Manufacturers often guide traders to help with sales, and traders inform manufacturers about customer opinions on products.

Thus, Channels of distribution handle numerous functions such as buying, selling, risk management, assembling, storage, grading, transportation, post-purchase service, financing, and market information.

Storage is crucial for perishable and bulky items like coal, petroleum, and iron. For products like automobiles, computers, and mobiles, after-sales service is vital.

Product promotion through advertising and sales activities helps increase sales. Middlemen engage in demonstrations, displays, and contests.

Negotiation occurs between manufacturers and customers to finalize deals. It covers product quality, guarantees, after-sales services, and pricing before transferring ownership.

Types of Distribution Channels Class 12

Major Pricing Methods Followed by Business Enterprises Class 12

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In reality, it’s difficult to ascertain exactly which pricing policy a firm practices. A firm uses a combination of different policies at once. The major pricing policies followed by business enterprises are discussed below:

1. Competitive Pricing:

Sets prices based on competitors’ rates, common in markets with little product differentiation. e.g. Coca-Cola introduced 200ml bottles at ₹ 8, prompting Pepsi to match the price.

2. Penetration Pricing:

Low initial prices to gain market share. e.g. Nirma used this to outcompete Surf by pricing its detergent powder lower.

3. One Price vs. Variable Price Policy:

One-price policy: same price for similar customers e.g. bulk discounts. Variable-price policy: different prices for similar products to different customers, such as discounts for loyal buyers.

4. Market Skimming Pricing:

High initial prices to recover investments quickly. e.g. Apple’s iPhone 7 was highly priced at launch to maximize early profits before competitors entered.

5. Discrimination or Dual Pricing:

Different prices based on customer’s ability to pay. Common with service industries like legal and medical services where fees vary per client.

6. Premium or Prestige Pricing:

High prices for high-quality, unique products. e.g. Van Heusen shirts cost more than local brands due to superior quality and brand reputation.

7. Leader Pricing:

Temporary price cuts on popular items to draw customers who then buy other regular-priced products. These loss leaders boost overall sales.

8. Psychological Pricing:

Prices set to influence buyers psychologically, like odd pricing (₹ 99 instead of ₹ 100) to make prices seem lower.

9. Price Lining:

Retailers offer different quality products at different price points. e.g. readymade shirts at ₹ 90, ₹ 150, and ₹ 500 for different quality levels.

10. Resale Price Maintenance:

Manufacturers set a minimum price to maintain product value and brand image. Distributors agree not to sell below this price.

11. Everyday Low Pricing:

Prices adjusted daily based on demand and supply, especially for perishable goods. e.g. vegetable prices fluctuate throughout the day.

12. Team Pricing:

Bundling products or services at a lower price than if bought separately. e.g. include car option packages and value meals.

Major Pricing Methods Followed by Business Enterprises Class 12

Types of Pricing Class 12

The post Major Pricing Methods Followed by Business Enterprises Class 12 appeared first on Commerceatease - Website for 11th & 12th Commerce.