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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. Total Markup on all goods on hand/ retail price of all goods on hand
Return on Sales
Selling Price Formula
Cumulative Markup % Formula
Assets
2. Original Retail price- markdown selling price
Promotion Errors
Retail Inventory Method
Dollar Markdown Formula
Expense Ratio
3. 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.
Markdown Percentage
Forced Obsolescence
Accounts Receivable (AR)
Expense Ratio
4. Costs involved in running the business
Financial Leverage Ratio Formula
Acid Test or Quick Ratio (QR) Formula
Operating Expenses
Net Sales
5. When fixed assets such as fixtures and equipment are continually used and therefore lose some of their monetary value (Ex: your car)
Depreciation
Pricing Errors
Profit Margin Analysis Formula
Clearance Markdowns
6. Short time - like 1 or 2 day sales
Temporary Price Reduction
Current Liabilities
Return on Sales
Accounts Receivable (AR)
7. Can be transformed simply and rapidly into cash
Current Assets
Reasons for taking Markdowns
Acid test or Quick Ratio
Net Sales
8. Assesses the retailers ability to realize adequate return on the money that is invested by the retail owner.
Markup % of Cost Formula
Net Sales
Uncontrollable Errors
Return on Net Worth
9. The cost of merchandise that was sold (including the method that was used to determine cost)
Markdown Cancellation ($) Formula
FIFO (First in - First out)
Cost of Goods Sold
Pricing Strategies: Price Zones
10. The prices from lowest to highest that are carried within a merchandise category
GMROII (Gross Margin Return on Inventory Investment)
Cost Complement Formula
Pricing Strategies: Price Ranges
Early Markdowns
11. Price change that results in reestablishing the original retail price to merchandise after it was temporarily marked down
Profit and Loss Statement (P&L Statement)
Expense Ratio Formula
Off-Price Markdowns
Markdown Cancellations
12. Net dollar markdown/ net dollar selling price
Pricing Strategies: Price Zones
Expense Ratio
Acid test or Quick Ratio
Markdown Percentage Formula
13. Temporary price reduction for a specific period of time for the express purpose of generating store traffic and sales. Prices return to original retail price at end of sale period.
Return on Sales
Return on Assets (ROA) Formul
Promotional Markdown
Inventory
14. One that is just enough to move the goods
Ideal Markdown
Financial Leverage Ratio
Return on Net Worth (RONW) Formula
Pricing Strategies
15. Dollar markup ($)/ retail price ($)
Price Sensitivity
Pricing Strategies: Price Ranges
Gross Margin
Markup % of Retail Formula
16. 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
Assets
Debt Equity Ratio
Dollar Markdown Formula
Pricing Errors
17. Cannot be readily converted to cash within one year. (Fixtures - equipment - land/buildings)
Fixed Assets
Assets Formula
Debt Equity Ratio Formula
Clearance Markdowns
18. Improper displays - merchandise returns due to high pressure selling
5 Steps of Retail Inventory Method
Buying Errors
Promotion Errors
Selling Price Formula
19. 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
Markup % of Retail Formula
Markdown Percentage
GMROII (Gross Margin Return on Inventory Investment)
Markdown
20. Strategy employed by retailers to buy and carry a predetermined number of price lines for a category of merchandise
Return on Sales
Retail Price Formula
Pricing Strategies: Price Lining
Return on Assets (ROA) Formul
21. 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.
Markup
Planned Initial Markup % Formula
Markdown optimization
Clearance Markdowns
22. Net Profit After Taxes/ Net Worth
GMROII (Gross Margin Return on Inventory Investment)
Cost of Goods Sold
Return on Net Worth (RONW) Formula
Expense Ratio Formula
23. Net Profit/ Net Sales
Loss-Leader
Off-Price Markdowns
Profit Margin Analysis Formula
Pricing Strategies
24. Evaluates the managament of capital
Uncontrollable Errors
Return on Sales
New Price
Net Sales
25. The awareness of the consumer to what they perceive to be the window of cost within which they will buy a particular product or service
Retail Inventory Method
Adage of Profitability for Retailers
Price Sensitivity
Markdown
26. When new styles or models come out every year - thus forcing the obsolescence of the previous year's model
Expense Ratio
Markdown Percentage
Forced Obsolescence
Balance Sheet
27. Amount of markdown usually less - take the loss early will be easier - strengthen goodwill - replenish stock in lower price lines - leads to higher stock turnover - higher likelihood merchandise will sell in a timely manner
Current Ratio (CR) Formula
Early Markdowns
Markdown
Selling Price Formula
28. Price is changed (up or down)
New Price
Price Sensitivity
LIFO (last in - first out)
Cumulative Markup
29. Also referred to as the income or operating statement. 5 Basic Elements: Net Sales - Cost of Goods sold - Gross Margin - Operating Expenses - Net profit
Promotion Errors
The Cost Method
Profit and Loss Statement (P&L Statement)
Late Markdowns
30. Inventory Valuation Method that combines taking inventory at retail prices and adjusting the cost value to reflect current retail value. 5 Steps Involved.
Return on Assets
Assets
Retail Inventory Method
Cost of Goods Sold (COGS) Formula
31. Dollar Markdown of Merchandise/ original retail selling price of merchandise being marked down
Reasons for taking Markdowns
Off-Price Markdown Percentage Formula
Turnover Rate Formula
Profit Margin Analysis Formula
32. Total Expenses/ Net Sales
LIFO (last in - first out)
Net Profit
Expense Ratio Formula
Early Markdowns
33. An aggregate of the original selling price. Should cover all expenses of the store - desired profit - take into account price reductions - alteration costs.
Price Sensitivity
Off-Price Markdowns
Initial Markup (IMU)
Sell-Through Rate
34. 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
Promotional Markdown
The Cost Method
Financial Leverage Ratio
Pricing Strategies: Price Zones
35. Debts owned by a retailer that require payment over an extended period of time (Fixtures - equipment - and property)
Pricing Strategies: Price Zones
Markup
Turnover Rate Formula
Fixed Liabilities
36. Liabilities+ Owner's equity or net worth
Assets Formula
Cash Flow Formula
Profit
Financial Leverage Ratio Formula
37. The value of this calculation is that consumers can understand the price reduction when the retailer is promoting this merchandise.
Depreciation
Return on Assets (ROA) Formul
Net Sales
Off-Price Markdowns
38. Represents the total dollar markdown as a percentage of total dollar net sales. This is typically not for an individual item.
Liabilities
Depreciation
Return on Net Worth (RONW) Formula
Markdown Percentage
39. 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
Financial Leverage Ratio
Clearance Markdowns
Net Profit
Current Liabilities
40. Cash Received by the retailer-cash leaving the retailer
Retail Price Formula
Cash Flow Formula
Markdown Percentage Formula
Loss-Leader
41. Net Profit After Taxes/ Total Assets
Profit Margin Analysis Formula
Forced Obsolescence
Return on Assets (ROA) Formul
Net Sales
42. (Cash + Accounts Receivable) / Current Liabilities
Original Price
Reasons for taking Markdowns
Acid Test or Quick Ratio (QR) Formula
Assets
43. Financial obligations that require payment within a short period of time (Wages - utitilites - Insurance)
Retail Inventory Method
Operating Expenses
Current Liabilities
Sell-Through Rate
44. Total Assets/ Net Worth
The Cost Method
Fixed Liabilities
Markdown Cancellations
Financial Leverage Ratio Formula
45. Assets collected within one year. Due to the widespread use of credit cards - AR for retailers has diminished with exceptions such as lay-a-way.
Loss-Leader
Adage of Profitability for Retailers
Reasons for taking Markdowns
Accounts Receivable (AR)
46. 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.
Inventory
Net Sales
Original Price
Cash Flow Formula
47. Current Assets/ Current Liabilities
Loss-Leader
Current Ratio (CR) Formula
Inventory
Fixed Liabilities
48. (gross margin % x Turnover) / (100%-markup %)
New Price
Buying Errors
Gross Margin Return on Inventory Investment-GMROI Formula
Forced Obsolescence
49. Ensures that there is enough cash to pay debts. Any time the ratio is colse to 1 - the retailer is said to be in a liquid position.
Acid test or Quick Ratio
Pricing Strategies
5 Steps of Retail Inventory Method
Return on Net Worth (RONW) Formula
50. 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
Cost Complement Formula
Markdown optimization
Off-Price Markdowns