Page 92 - DMGT553_RETAIL_STORE_MANAGEMENT

Unit 5: Retail Arithmetic

Notes
Acid-Test Ratio
Acid-Test Ratio = Current Assets - Inventory ÷ Current Liabilities
Average Inventory

Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory)
÷ 2
Basic Retailing Formula
Cost of Goods + Markup = Retail Price

Retail Price - Cost of Goods = Markup
Retail Price - Markup = Cost of Goods
Break-Even Analysis
Break-Even ($) = Fixed Costs ÷ Gross Margin Percentage
Contribution Margin

Contribution Margin = Total Sales - Variable Costs
Cost of Goods Sold
COGS = Beginning Inventory + Purchases - Ending Inventory
Gross Margin
Gross Margin = Total Sales - Cost of Goods
Gross Margin Return on Investment

GMROI = Gross Margin $ ÷ Average Inventory Cost
Initial Markup
Initial Markup % = (Expenses + Reductions + Profit) ÷ (Net Sales + Reductions)
Inventory Turnover (Stock Turn)
Turnover = Net Sales ÷ Average Retail Stock

Maintained Markup
MM $ = (Original Retail - Reductions) - Cost of Goods Sold
MM % = Maintained Markup $ ÷ Net Sales Amount
Margin %
Margin % = (Retail Price - Cost) ÷ Retail Price
Markup
Markup $ = Retail Price - Cost

Markup % = Markup Amount ÷ Retail Price
Net Sales
Net Sales = Gross Sales - Returns and Allowances
Open to Buy
OTB (retail) = Planned Sales + Planned Markdowns + Planned End of Month Inventory -
Planned Beginning of Month Inventory
Contd....

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