A retailer has yearly sales of $650,000.? Inventory on January 1 is $250,000 (at cost).? During the year, $500,000 of merchandise (at cost) is purchased.? The ending inventory is $275,0

MAR 4231 = Financial Formulas

Note: When calculating the financials, please round to four decimal places. For example:

1.7658643983 = 1.7659 (four decimal places)

0.4322222222 = 0.4322 (four decimal places)

Asset turnover = Net sales

Total assets

Cost complement = Total cost valuation

Total retail valuation

Cost of goods sold = Cost of merchandise available for sale – cost value of ending inventory

Ending retail book value of inventory = on paper, how much is your inventory worth

(at retail) = Merchandise available for sale – Sales – Deductions

Financial Leverage = Total assets

Net worth

Gross Profit = Sales – Cost of Goods Sold

Net Profit = Gross Profit – Operating Expenses

Net Profit Margin = Net profit after taxes

Net sales

Profit & Loss Statement =

Sales – less cost of goods sold = gross profit

Return of Assets = Net profit margin x asset turnover

Return on Net worth = Net profit margin x Asset turnover x Financial leverage

Stock Shortages = Ending retail book value of inventory – physical inventory at retail

Total merchandise available (at cost) =

Beginning monthly inventory + Net purchases + transportation charges

Total merchandise available (at retail) = Beginning monthly inventory + Net purchases

RETAIL MARKETING

RETAIL JARGON / FORMULAS

Trend Definition: This year’s business vs. Last year’s business

Formula: This year’s sales / last year’s sales

Example: Year Volume

2017 12,000

2018 15,000

Trend = 15,000/12,000 = 125%

Conclusion: We sold 25% more goods this year than last year.

Sell Thru % Definition: Percentage of stock sold for a given time period.

Formula: Units sold / beginning on-hand stock

Examples: Week of January 1, 2019

Beginning on-hand stock = 1,000

Units Sold = 200

Sell thru % = 200 / 1,000 = 20%

Conclusion: We sold thru 20% of our stock in the week of January 1st.

Retail Mark-up Definition: Mark-up % which determines retail price charged to our customers. Formula: Retail – Cost / Retail

Example: Cost = $15

Retail = $28

$28 – ($15 / $28) = 46.4%

Conclusion: The mark-up % is 46.4%

RETAIL JARGON / FORMULAS (continued)__

Turn Definition: Amount of times the average inventory sells in a given period (aka: “Velocity”) of time. Formula: Sales / Average Stock

Example: Units sold = 1,525

Average stock = 600 units

Turn = 1,525 / 600 = 2.54

Conclusion: We turned our stock 2.54 times last year

Markdown % Definition: What % your markdown was to your sales volume?

Formula: Markdown dollars / sales volume

Examples: Sales volume = $52,000

Markdown $ = $3,400

Markdown % = $3,400 / $52,000 = 6.5%

Conclusion: 6.5% of our sales were markdowns.

Gross Margin: The difference between the price that the customer pays for merchandise and the cost of the merchandise. It is the dollar amount of profit before other expenses are subtracted.

Markdowns Percentage reduction in the initial retail price.

Market A group of vendors in a concentrated geographic location or even under roof.

Mark Up The difference between the retail of merchandise and the cost of that merchandise.

Open to Buy The amount of merchandise a buyer may order during the balance of a period. Plan that keeps track of how much is spent in a month and how much is left to spend.

Receipts Merchandise which has arrived from vendors and has been counted and recorded as stock.

UPC Universal Product Code. Black and white bar code, found on the ticket box of the merchandise, which has a 12 digit number assigned to it.

Vendor Any firm from which a retailer obtains merchandise.