Class 6

Question 1

Income Statement:

Answer 1

Report that measures the financial performance of your
business.
Gross profit-– Total revenue minus COGS
Depreciation-– Cost of wear and tear on the value of a tangible asset
Amortization-– Decreasing value of intangible assets over time (e.g.,
patents)

Question 2

Operating profit:
Interest expense:
Net income:
Pro forma income statements:

Answer 2

Operating profit– Amount left over from revenue
Interest expense– Good indicator of the company’s debt
Net income– What is left after all costs, expenses, and taxes have
been paid
Pro forma income statements– projections of what the
company could do

Question 3

Pricing Strategies:

Answer 3

No right way to determine pricing strategy, how much are your competitors charging, how much experience and reputation (or credentials) do you have, how much are customers willing/able to pay.

Question 4

Different Types of Pricing Strategies:

Answer 4

Competition-led pricing– Copying the prices of other businesses
Customer-led pricing– Asking customers what they are willing to pay
Loss leader– Offering a product or service at a below-cost price to attract new customers
Introductory offer– Offering the product or service at a lower price when first released
Skimming– Overpricing innovative items until competition emerges
Psychological pricing– Adjusting prices to make customers perceive a better deal
Fair pricing– Pricing based on perceived fairness of gains for the business and the customer
Bundled pricing– Packaging a set of goods or services together at a lower price

Question 5

Different Types of Pricing Strategies:

Answer 5

Cost-led pricing– Pricing based on desired profit margins
Target-return pricing– Pricing based on overall business ROI
Value-based pricing– Pricing based on overall value to the
customer
The key to pricing is to ensure you make a profit.