Page 101 - DMGT550_RETAIL_MANAGEMENT

Retail Management

Notes
Did u know? The strategic profit model (also known as DuPont Model gives a visual view
of an organisation's finances and provides the ability to understand and analyse financial
performance and return of investment.

Self Assessment

Fill in the blanks:
1. .................... must test to ensure that they are sending the appropriate message to the
appropriate households.

2. The .................... is a crucial part of understanding how different retail strategies can be
used to pursue similar financial goals.
3. A standard measure of financial success is .................... .

4. Businesses must test to ensure that they are sending the appropriate message to the
appropriate .................... .
5. To increase ...................., businesses must develop relationships with customers, continually
selling the value of the product in their situation.

6.3 Analysis of Financial Strength

Financial ratio formulas can be used to determine a companies stability, long term growth, and
investment potential. Using these basic ratio formulas can give you an objective insight into
financial strength.
Instructions
1. Understand a companies leverage or borrowing power ratio. Leveraging is a companies
amount of debt in relation to its assets and equity. Ratio formulas measuring financial
leveraging include debt to equity and asset turnover.
2. Determine a companies financial liquidity ratio. Financial liquidity is figured by using
formulas dividing total assets by total liabilities.

3. Estimate a companies operating ratio or use of capital. To find the ratio of working capital
divide the companies total day to day earnings by costs.
4. Measure a companies profitability ratio. Profitability is measured with a number of formula
ratios but the simplest is gross profit margin in which gross profit are divided by total
revenue. This should show some variation but remain mostly stable as an indicator of
good financial practices.
5. Evaluate a companies financial solvency. Solvency is stability over time or the
likely-hood of a company falling into bankruptcy. Ratio formulas used to measure this
include debt to equity, debt to assets, fixed costs, or interest ratios.

!

Caution The recent years, several researchers have presented their suggestions about BI
evolution in order to serve performance measurement and management.

96 LOVELY PROFESSIONAL UNIVERSITY