Class Notes (836,591)
Canada (509,862)
RMG 200 (77)
Ken Wong (25)

Chapter 8.pdf

3 Pages
Unlock Document

Retail Management
RMG 200
Ken Wong

Chapter 8 Net Revenue (aka net sales) = Gross revenue ‒ discounts ‒ returns Gross Profit= Net revenue ‒ cost of goods sold (COGS) (Does not include total operating expenses) COGS: Amount on an income instatement that represents the cost of purchasing raw materials and manufacturing finished products Income from Operation (IFO) = Net revenue ‒ cost of goods sold (COGS) ‒ SG&A (Does not consider income from selling property or other abnormal business operations) Net Income = Net revenue ‒ cost of goods sold (COGS) ‒ SG&A ‒ other expense +other income – tax 1. Income Statement • a.k.a. Profit and Loss statement, P&L account, operating statement, and earnings statement • Over a period of time 2. Balance Sheet - A snapshot Diluted Earnings Per Share (Diluted EPS) = Profits / (shares outstanding + warrants + stock options + convertible preferred shares) Assets = Liabilities + Owner’s Equity Gross Margin (%) = (Revenue – Cost of goods sold)/Revenue Inventory Turnover = COGS/Average Inventory Example - Cost of goods sold of a retail business during a year was $84,270 and its inventory at the beginning and at the ending of the year was $9,865 and $11,650 respectively. Calculate the inventory turnover ratio of the business from the given information. Solution Average Inventory = ($9,865 + $11,650) ÷ 2 = $10,757.5 Inventory Turnover = $84,270 ÷ $10,757.5 ≈ 7.83 3 takeaways • Understand merchandise planning, don’t buy more than what you can sell • Mark down old inventory • Don’t be out of stock of wanted, key items Asset Turnover = Net Sales/Total Assets Antique cabinet: $50,000/$5,000 = 10 (option 1) Plywood cabinet: $40,000/$500 = 80 (option 2) Ratio Analysis - The measure of the inter-relationship between different sections of the financial statements, which then is compared with the budgeted or forecasted results, prior year results - A ration is a numerator divided by a denominator - Resulting calculation could be a ratio of one of three types: percentage, multiplier, a number of days Ration Comparisons - Cross-sectional Ratio Analysis  Retailer compares their company’s ratios to another company’s or to the industry ratios  Must be calculated for the same time period (same year or quarter) - Time-series Analysis  Evaluates performance over time  Retailers would compare ratios for the most recent fiscal year or quarter with previous ratios to determine whether they are meeting financial objectives  Can identify developing trends and use the knowledge of these trends to assist in future planning - Combination of Cross-sectional Ratio and Time-series  By combining these two analyses the retailer can evaluate its performance over time as
More Less

Related notes for RMG 200

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.