3.

5 Profitability and ratio analysis 272

Ratio analysis
The purpose ofratio analysis 272
Profitability and efficiency ratios 273
Liquidity ratios 277
Uses and limitations ofratio analysis 278
Profitability and liquidity ratios and the CUEGIS concepts 280

3.6 Efficiency ratio analysis [HL Only] 283

Efficiency ratios 283
Efficiency ratios and the CUEGIS concepts 289

3.7 Cash flow 291

The difference between cash and profit 291
The working capital cycle - 292
Cash flow forecasts 294
Investment, profit and cash flow 298
Strategies todeal with cash flow problems 299
Cash flow and the CUEGIS concepts 303

3.8 Investment appraisal 306

Payback period 306
Average rate ofreturn (ARR) 308
Net present value [Higher level] 310
Investment appraisal andtheCUEGIS concepts 314

3.9 Budgets [HL Only] 316

The importance ofbudgets 316
Cost and profit centres 320
Variance analysis 321
Budgets and the CUEGIS concepts 324

4.1 The role of marketing 327

Definition and nature of marketing 327
Marketing goods and services 329
Market and product orientation 330
Commercial marketing and social marketing 331
The market 333
Market share 335
Marketing objectives 336
Marketing strategies and changes in customer preferences 337
The roleof marketing and the CUEGIS concepts 339

4.2 Marketing planning 344

Elements of a marketing plan 344
The 4 Ps of the marketing mix 345
The marketing mix and marketing objectives 348
Target markets and market segments 350
Targeting, segmentation and consumer profiles 350
Niche and mass markets 354
Ix