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Retail Financials
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Subject
:
business-skills
Instructions:
Answer 50 questions in 15 minutes.
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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. Inventory Valuation Method that combines taking inventory at retail prices and adjusting the cost value to reflect current retail value. 5 Steps Involved.
Reasons for taking Markdowns
GMROII (Gross Margin Return on Inventory Investment)
Pricing Errors
Retail Inventory Method
2. Evaluates the managament of capital
Return on Sales
Profit and Loss Statement (P&L Statement)
Reasons for taking Markdowns
Return on Net Worth
3. Debts owned by a retailer that require payment over an extended period of time (Fixtures - equipment - and property)
Return on Net Worth (RONW) Formula
Fixed Liabilities
Dollar Markdown Formula
Original Price
4. Sales for the period/ average inventory
Markdown Optimization
Return on Net Worth
Turnover Rate Formula
Promotion Errors
5. What the retailer owns in monetary value
Assets
Clearance Markdowns
Acid Test or Quick Ratio (QR) Formula
Operating Expenses
6. Represents the total dollar markdown as a percentage of total dollar net sales. This is typically not for an individual item.
Debt Equity Ratio Formula
Markdown Percentage
Pricing Depends on 2 factors
Profit and Loss Statement (P&L Statement)
7. (1) Response of consumers and (2) cost of receiving - handling - and placing merchandise for sale.
Pricing Depends on 2 factors
Current Ratio (CR) Formula
Planned Initial Markup % Formula
Financial Leverage Ratio Formula
8. Cannot be readily converted to cash within one year. (Fixtures - equipment - land/buildings)
Fixed Assets
Cost of Goods Sold (COGS) Formula
Turnover Rate Formula
Original Price
9. 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.
Current Liabilities
Acid test or Quick Ratio
Cost Complement Formula
Buying Errors
10. The energizing force that fuels and sustains our economic system
Promotion Errors
Markup % of Retail Formula
Pricing Strategies: Price Lining
Profit
11. Improper displays - merchandise returns due to high pressure selling
Promotion Errors
Markdown Cancellations
Markup % of Cost Formula
Fixed Liabilities
12. Dollar markup ($)/ cost price ($)
Markup % of Retail Formula
Markup % of Cost Formula
Gross Margin Return on Inventory Investment-GMROI Formula
Debt Equity Ratio Formula
13. 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
The Cost Method
New Price
Markup
Off-Price Markdown Percentage Formula
14. When fixed assets such as fixtures and equipment are continually used and therefore lose some of their monetary value (Ex: your car)
Current Ratio (CR) Formula
GMROII (Gross Margin Return on Inventory Investment)
Markup
Depreciation
15. Priced too high initially - priced too low - selling price of competitors
Fixed Assets
Return on Net Worth (RONW) Formula
Pricing Errors
Balance Sheet
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
Debt Equity Ratio
GMROII (Gross Margin Return on Inventory Investment)
Operating Expenses
Original Price
17. Statistical forecasting tool that helps retailers to predict how apparel markdowns may affect the bottom-line business and objectives before the markdowns are implemented.
Gross Margin
Early Markdowns
Markdown Optimization
Net Sales
18. The difference between the total delivered cost and the total retail price of merchandise handled during a given period.
Off-Price Markdown Percentage Formula
Late Markdowns
Cumulative Markup
Retail Inventory Method
19. All of the capital used in operating the store - whether provided by the owners or creditors (vendors - banks)
Markup
Profit Margin
Return on Assets
Net Profit
20. 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.
Adage of Profitability for Retailers
Markup % of Retail Formula
Profit Margin
Markup
21. Cost Price/ (100%-markup %)
Pricing Strategies: Price Ranges
LIFO (last in - first out)
Fixed Assets
Retail Price Formula
22. The number of items remaining in stock x dollar markdown
Return on Assets
Expense Ratio Formula
Markdown Cancellation ($) Formula
Adage of Profitability for Retailers
23. 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.
Financial Leverage Ratio Formula
Accounts Receivable (AR)
The Cost Method
Turnover Rate Formula
24. First price or Manufacturers suggestet Retal Price (MSRP)
Promotion Errors
Profit Margin Analysis Formula
Original Price
Clearance Markdowns
25. Sales less cost of goods sold
Pricing Strategies: Price Lining
Gross Margin
Current Ratio
Markdown
26. Reduction in price of an item - if that item is sold - the result is a lower monetary intake for that item
Net Sales
Current Liabilities
Current Assets
Markdown
27. Total Expenses/ Net Sales
Cost of Goods Sold (COGS) Formula
Expense Ratio Formula
Markdown Optimization
Late Markdowns
28. (gross margin % x Turnover) / (100%-markup %)
Return on Assets
Markup % of Retail Formula
Gross Margin Return on Inventory Investment-GMROI Formula
Liabilities
29. Price change that results in reestablishing the original retail price to merchandise after it was temporarily marked down
Markdown Cancellations
New Price
Retail Inventory Method
Cost of Goods Sold (COGS) Formula
30. Price is changed (up or down)
Temporary Price Reduction
Promotional Markdown
New Price
Return on Net Worth (RONW) Formula
31. The value of this calculation is that consumers can understand the price reduction when the retailer is promoting this merchandise.
Original Price
Return on Assets (ROA) Formul
Off-Price Markdowns
Forced Obsolescence
32. 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.
Promotional Markdown
Late Markdowns
Expense Ratio
Regular Price
33. 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
Gross Margin Return on Inventory Investment-GMROI Formula
5 Steps of Retail Inventory Method
GMROII (Gross Margin Return on Inventory Investment)
Financial Leverage Ratio
34. 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
Clearance Markdowns
5 Steps of Retail Inventory Method
Gross Margin
Net Sales
35. Gross margin less operating expenses=NP before taxes. Deducting taxes=NP after taxes
Net Profit
Markdown Percentage Formula
Cost of Goods Sold (COGS) Formula
Markdown Percentage
36. 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
Dollar Markdown Formula
LIFO (last in - first out)
Promotional Markdown
Markdown Optimization
37. Ranges of prices that appeals for a particular group of consumers
Return on Net Worth
Sell-Through Rate
Pricing Strategies: Price Zones
Balance Sheet
38. The weather - merchandise is shopworn - economic downturn
Liabilities
Cost of Goods Sold
Uncontrollable Errors
GMROII (Gross Margin Return on Inventory Investment)
39. Costs involved in running the business
Operating Expenses
Promotion Errors
Adage of Profitability for Retailers
LIFO (last in - first out)
40. 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
Financial Leverage Ratio
Markup % of Cost Formula
Current Ratio
Markdown Percentage Formula
41. Usually lower than original - but held for longer period
Uncontrollable Errors
Assets
LIFO (last in - first out)
Regular Price
42. Can be transformed simply and rapidly into cash
Net Sales
Inventory
Current Assets
Pricing Strategies
43. 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 and Loss Statement (P&L Statement)
Promotion Errors
Depreciation
New Price
44. Cost + Markup
Cost of Goods Sold (COGS) Formula
Selling Price Formula
Off-Price Markdown Percentage Formula
Gross Margin Return on Inventory Investment-GMROI Formula
45. Total Markup on all goods on hand/ retail price of all goods on hand
Gross Margin
Cumulative Markup % Formula
Profit
Debt Equity Ratio
46. Buying errors - promotion errors - pricing errors - uncontrollable errors
Reasons for taking Markdowns
Depreciation
The Cost Method
Price Sensitivity
47. Current Liabilites/ Net Worth
LIFO (last in - first out)
Financial Leverage Ratio
Debt Equity Ratio Formula
Cost of Goods Sold (COGS) Formula
48. When new styles or models come out every year - thus forcing the obsolescence of the previous year's model
Gross Margin
Pricing Strategies: Price Lining
Debt Equity Ratio
Forced Obsolescence
49. Dollar markup ($)/ retail price ($)
Markup % of Retail Formula
Cost of Goods Sold (COGS) Formula
Markdown Cancellations
Reasons for taking Markdowns
50. Based on a calculation commonly represented as a percentage - comparing the amount of inventory a retailer receives from a manufacturer or supplier against what is actually sold to the consumer
Markdown Cancellations
Accounts Receivable (AR)
Sell-Through Rate
New Price
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