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Test your basic knowledge |
Retail Financials
Start Test
Study First
Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. In the Cost Method. Merchandise most recently purchased is assumed to have been sold first. Therefore - the ending inventory reflects the items in stock for the longest period of time. Produces lowest ending inventory value and highest cost of goods
Acid Test or Quick Ratio (QR) Formula
Off-Price Markdowns
LIFO (last in - first out)
Markup % of Cost Formula
2. The retailers financial condition at a specific point in time
Ideal Markdown
Turnover Rate Formula
Acid test or Quick Ratio
Balance Sheet
3. AKA Return on Sales - Profit analysis; Indicates the extend to which retailers have the ability to cover their expenses and earn a profit - as well as a buyers ability to purchase the correct assortment of merchandise
Financial Leverage Ratio
Profit and Loss Statement (P&L Statement)
Off-Price Markdown Percentage Formula
Profit Margin
4. Total Assets/ Net Worth
Inventory
Current Assets
Financial Leverage Ratio Formula
GMROII (Gross Margin Return on Inventory Investment)
5. Indicates gross margin derived from the sales of merchandise and it's ability to cover operating expenses. Helps a retailer determine how much rent they should pay - what salary the owner should draw - and how much they should pay their associates.
Pricing Strategies: Price Lining
Markdown Cancellation ($) Formula
Loss-Leader
Expense Ratio
6. Net Profit After Taxes/ Total Assets
Planned Initial Markup % Formula
Return on Sales
Return on Assets (ROA) Formul
New Price
7. Cash Received by the retailer-cash leaving the retailer
Ideal Markdown
Cash Flow Formula
Turnover Rate Formula
Current Assets
8. The extent to which a retailer is using debt or borrowed funds to operate the business. (The higher the FLR the higher the debt)
Cumulative Markup
Markup % of Cost Formula
Financial Leverage Ratio
Retail Price Formula
9. The largest sum of money in current assets. Can be presented in either cost or retail terms. Should be purchased for a short period of time - as products lose monetary value over time and are subject to markdowns.
Markup
Debt Equity Ratio Formula
Inventory
Cash Flow Formula
10. Strategy employed by retailers to buy and carry a predetermined number of price lines for a category of merchandise
Loss-Leader
Markdown Optimization
Promotional Markdown
Pricing Strategies: Price Lining
11. (Cash + Accounts Receivable) / Current Liabilities
Acid Test or Quick Ratio (QR) Formula
Pricing Strategies
Ideal Markdown
Turnover Rate Formula
12. Merchandise will sell at highest price longer period of time - appear exclusive - sale of goods at regular price is not disrupted - greater amount of goods can be accumulated and then marked down.
Assets Formula
Cumulative Markup
Late Markdowns
Gross Margin Return on Inventory Investment-GMROI Formula
13. First price or Manufacturers suggestet Retal Price (MSRP)
Gross Margin Return on Inventory Investment-GMROI Formula
Markdown Cancellations
Balance Sheet
Original Price
14. Temporary price reduction for a specific period of time for the express purpose of generating store traffic and sales. Prices return to original retail price at end of sale period.
Assets Formula
Inventory
Promotional Markdown
Cumulative Markup % Formula
15. Financial obligations that require payment within a short period of time (Wages - utitilites - Insurance)
Turnover Rate Formula
Reasons for taking Markdowns
Selling Price Formula
Current Liabilities
16. Financial debts incurred by a retailer
Return on Assets
Liabilities
Expense Ratio Formula
Sell-Through Rate
17. Also referred to as the income or operating statement. 5 Basic Elements: Net Sales - Cost of Goods sold - Gross Margin - Operating Expenses - Net profit
Profit
Profit and Loss Statement (P&L Statement)
Assets Formula
Balance Sheet
18. Priced too high initially - priced too low - selling price of competitors
Regular Price
Markdown
Expense Ratio Formula
Pricing Errors
19. Evaluates the managament of capital
Markdown optimization
Expense Ratio
Return on Sales
The Cost Method
20. Assesses the retailers ability to realize adequate return on the money that is invested by the retail owner.
Return on Net Worth
Balance Sheet
5 Steps of Retail Inventory Method
Accounts Receivable (AR)
21. Inventory Valuation Method where the cost to the retailer of each item purchased from a vendor is entered in the accounting system and/or placed on the merchandise item or on it's package. At times - freight charges are built into the cost. Coding of
Promotion Errors
The Cost Method
Sell-Through Rate
Regular Price
22. To make a profit buyers must set an appropriate price considering many variables and using past experience and knowledge of future trends. A markup on an item does not typically remain constant.
Forced Obsolescence
Markup
Late Markdowns
Gross Margin
23. When fixed assets such as fixtures and equipment are continually used and therefore lose some of their monetary value (Ex: your car)
Depreciation
Markup % of Cost Formula
Profit and Loss Statement (P&L Statement)
Cumulative Markup
24. What the retailer owns in monetary value
Assets
Assets Formula
Net Sales
Operating Expenses
25. Inventory Valuation Method that combines taking inventory at retail prices and adjusting the cost value to reflect current retail value. 5 Steps Involved.
Inventory
Current Assets
Temporary Price Reduction
Retail Inventory Method
26. Dollar markup ($)/ retail price ($)
Late Markdowns
Markup % of Retail Formula
Early Markdowns
Net Profit
27. Net dollar markdown/ net dollar selling price
Return on Net Worth
Off-Price Markdown Percentage Formula
Markdown Percentage Formula
Dollar Markdown Formula
28. Original Retail price- markdown selling price
Markdown Cancellation ($) Formula
Dollar Markdown Formula
Early Markdowns
Forced Obsolescence
29. Gross margin less operating expenses=NP before taxes. Deducting taxes=NP after taxes
Net Profit
Markup % of Cost Formula
Sell-Through Rate
Markdown Percentage Formula
30. The higher the ratio the quicker current liabilities can be paid. This ratio also indicates the margin of safety a retailer has on hand to cover possible shrinkages
Current Ratio
Expense Ratio Formula
Gross Margin
Financial Leverage Ratio Formula
31. Debts owned by a retailer that require payment over an extended period of time (Fixtures - equipment - and property)
Clearance Markdowns
Temporary Price Reduction
Pricing Strategies
Fixed Liabilities
32. Sales for the period/ average inventory
FIFO (First in - First out)
Turnover Rate Formula
Cumulative Markup % Formula
New Price
33. Merchandise Available for sale at cost/ Merchandise available for sale at retail
Cost Complement Formula
Sell-Through Rate
Off-Price Markdowns
Markup % of Retail Formula
34. Price change that results in reestablishing the original retail price to merchandise after it was temporarily marked down
Markdown
Markdown Cancellations
Markup % of Retail Formula
Profit and Loss Statement (P&L Statement)
35. Current Assets/ Current Liabilities
Current Ratio (CR) Formula
Cost Complement Formula
Depreciation
Cost of Goods Sold (COGS) Formula
36. Statistical forecasting tool that helps retailers to predict how apparel markdowns may affect the bottom-line business and objectives before the markdowns are implemented
Return on Net Worth (RONW) Formula
Cumulative Markup
Current Ratio (CR) Formula
Markdown optimization
37. (1) Response of consumers and (2) cost of receiving - handling - and placing merchandise for sale.
Pricing Depends on 2 factors
Expense Ratio
Profit
Current Ratio
38. Examines the financial health of a retailer - as one of the best indicators of having too much debt in relationship to net worth. Comparres the money that vendors or banks are risking with the money that the retail owners have invested in their opera
Forced Obsolescence
Cumulative Markup % Formula
Profit
Debt Equity Ratio
39. Buying errors - promotion errors - pricing errors - uncontrollable errors
Return on Net Worth (RONW) Formula
Cash Flow Formula
Reasons for taking Markdowns
Accounts Receivable (AR)
40. Basic premise is to increase profits through more sales without an increase in inventory. Inventory is expressed in cost terms rather than cost percent - because it is related to investment dollars in gross margin - it should be expressed in cost num
GMROII (Gross Margin Return on Inventory Investment)
Promotion Errors
Acid Test or Quick Ratio (QR) Formula
Loss-Leader
41. When new styles or models come out every year - thus forcing the obsolescence of the previous year's model
Profit and Loss Statement (P&L Statement)
5 Steps of Retail Inventory Method
Forced Obsolescence
Gross Margin Return on Inventory Investment-GMROI Formula
42. Total Markup on all goods on hand/ retail price of all goods on hand
Regular Price
Cumulative Markup % Formula
FIFO (First in - First out)
Net Profit
43. Price reduction for merchandise that has not lived up to buyers' expectations. Includes broken assortments of merchandise - merchandise lines that buyers no longer want to carry - shopworn goods - items that haven't sold because of an event beyond bu
Planned Initial Markup % Formula
Uncontrollable Errors
Acid Test or Quick Ratio (QR) Formula
Clearance Markdowns
44. The energizing force that fuels and sustains our economic system
Reasons for taking Markdowns
Profit
Debt Equity Ratio
Acid Test or Quick Ratio (QR) Formula
45. Current Liabilites/ Net Worth
Adage of Profitability for Retailers
Initial Markup (IMU)
Turnover Rate Formula
Debt Equity Ratio Formula
46. The value of this calculation is that consumers can understand the price reduction when the retailer is promoting this merchandise.
Off-Price Markdowns
Markdown
Current Liabilities
Pricing Strategies: Price Lining
47. The number of items remaining in stock x dollar markdown
Markdown Cancellation ($) Formula
Uncontrollable Errors
Markdown Percentage
Markdown optimization
48. Dollar markup ($)/ cost price ($)
Markup % of Cost Formula
New Price
Accounts Receivable (AR)
Net Profit
49. Beggining inventory for a time period+ purchases=merchandise available for sale- ending inventory
Current Ratio
Reasons for taking Markdowns
New Price
Cost of Goods Sold (COGS) Formula
50. In Cost Method. Merchandise sold during a time period is assumed to be sold in the order the merchandise was received. Merchandise on hand for the longest period of time is sold first. Therefore - the ending inventory reflects the items in stock for
Markup % of Cost Formula
Pricing Strategies
Liabilities
FIFO (First in - First out)