MBA Fundamentals: Marketing, Accounting, and Finance

Vocabulary and formulas covering fundamental MBA concepts in business, marketing strategy, accounting principles, and financial analysis.

Marketing Strategy Steps

A mandatory seven-step process: consumer analysis, market analysis, competitive analysis, channel review, preliminary marketing mix, economics evaluation, and revision.

Consumer Analysis

The study of consumer needs, identifies as functional, emotional, social, or personal, to determine how a product fits into a customer's life.

Buyer vs. User

The distinction between the individual who purchases the product (e.g., a parent) and the individual who actually consumes or uses it (e.g., a toddler).

Buying Process

A five-step emotional journey consisting of awareness, search, evaluation, purchase, and post-purchase feeling.

Involvement

The level of consumer research and time spent on a purchase; high involvement includes cars or insurance, while low involvement includes items like gum.

Segmentation

The practice of dividing the human species into factions based on geographic, demographic, psychographic, and behavioral characteristics.

Segmentation Tests

Seven MBA-approved criteria to evaluate a market slice: measurability, accessibility, substantiality, profitability, compatibility, effectiveness, and defendability.

Relevant Market

The specific niche or segment an organization targets, predicated on the idea that if everyone is the target audience, then no one is.

Core Competencies

The unique strengths of a company, such as technology, brand strength, or logistics, that are difficult for competitors to replicate.

Perceptual Mapping

A visual tool using two axes (e.g., price vs. quality) to plot where a company and its competitors sit on the market battlefield.

Channel Margins

The profit cuts taken by each entity in the distribution chain, such as manufacturers, wholesalers, and retailers.

Retail Margin Formula

$$\text{Retail Margin} = \frac{\text{Retail Price} - \text{Wholesale Price}}{\text{Retail Price}} \times 100\%$$

Marketing Mix (The 4 Ps)

The strategic pillars of a marketing plan: Product, Place, Promotion, and Price.

Brand Equity

The magical value a brand adds to a product without changing the actual item itself.

Product Life Cycle (PLC)

The four stages of a product's existence: Introduction, Growth, Maturity, and Decline.

Distribution Types

Three levels of availability: Exclusive (high control), Selective (some outlets), and Mass (everywhere).

Promotion Metrics

Methods to measure advertising success including Reach (audience size), Frequency (how often), and CPM (cost per $1,000$ impressions).

Push vs. Pull Strategy

Push involves shoving products toward consumers; Pull involves seducing customers into wanting the product.

Break-even Point

The stage where total revenue equals total costs, resulting in neither profit nor loss.

Accounting Equation

$$\text{Assets} = \text{Liabilities} + \text{Equity}$$

Income Statement

A financial report showing the company's performance over time using the formula: $\text{Profit} = \text{Revenue} - \text{Expenses}$.

Gross Margin Formula

$$\text{Gross Margin} = \text{Revenue} - \text{COGS}$$

Cash Flow Statement

A report tracking the movement of real money through three categories: operating cash, investing cash, and financing cash.

Accrual Accounting

An accounting method that records revenue when earned (not collected) and expenses when incurred (not paid).

Straight-line Depreciation Formula

$$\text{Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}}$$

FIFO vs. LIFO

Inventory methods: First In, First Out (FIFO) sells oldest items first; Last In, First Out (LIFO) sells newest items first.

Working Capital

$$\text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}$$

Current Ratio

$$\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$$

Inventory Turnover

$$\text{Inventory Turnover} = \frac{\text{COGS}}{\text{Average Inventory}}$$

Contribution Margin

$$\text{Contribution Margin} = \text{Price} - \text{Variable Cost}$$

Break-even Units Formula

$$\text{Break-even Units} = \frac{\text{Fixed Costs}}{\text{Contribution Margin}}$$

Present Value (PV) Formula

$$PV = \frac{FV}{(1 + r)^{t}}$$

Net Present Value (NPV)

The sum of all future discounted cash flows minus the initial investment; positive NPV indicates a good project.

Internal Rate of Return (IRR)

The discount rate that makes the Net Present Value (NPV) of a project equal to zero.

Beta (\beta)

A metric measuring asset volatility relative to the market: $\beta = 1$ moves with the market, $\beta > 1$ is more volatile, and $\beta < 1$ is more stable.

Weighted Average Cost of Capital (WACC)

A formula blending the cost of equity and debt to determine the minimum return a project must earn to avoid embarrassing the company.