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Lecture 8

RMG 200 Lecture Notes - Lecture 8: Credit Union, Profit Maximization, Nonprofit Organization


Department
Retail Management
Course Code
RMG 200
Professor
Ken Wong
Lecture
8

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Chapter 8
3 Types of objectives (for being a retailer)
1. Financial: Profit maximization
2. Societal: Non-profit organization? E.g., Credit Union (non-profit in USA, for-profit in
CAN)
- members who have accounts in the credit union are the owners of the credit union
- Serve members, not profit maximization"
3. Personal: E.g., Cup cake shop, hair dresser...etc." Working is an enjoyment
Ratio Analysis:
- the analysis of a retailers financial statement.
- Using financial data from the balance sheet and/or the income statement to
understand profitability over a period of time
Types:
1. Cross-section ratio analysis
- comparing a retailer’s ratio to another companys during the same period.
Eg. Mcdonalds vs. burger king (Q4 2014)
2. Time-series ratio analysis
- compares a retialers ratios for the most recent year or quarter to see if they are
meeting financial goals
Eg. Q4 2012 vs Q4 2013 vs Q4 2014
Terms:
Net Revenue (aka net sales): gross revenue – discounts – returns
Gross Profit (gross margin): Net revenue – cost of goods sold (COGS)
- does not include total operating expenses (eg. Staff salary, rent)
Income from Operations (IFO): Net revenue – cost of goods sold – selling, general and
administrative (SG&A)
- does not consider income from selling property or other abnormal business
operations
Net Income= net revenue – cost of goods sold – SG&A – other expense + other income –
tax
2 Important Financial Tables:
1. Income statement
- aka. Profit and loss statement, P&L account, operating statement, and earning
statement
- over a period of time
2. Balance sheet
- a snapshot
A= L + O.E
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