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Stock Cover in Retail - DOC

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Stock Cover in Retail - DOC Powered By Docstoc
					   Business Acumen…Test your
          knowledge.
    All answers may differ from those published due to roundings.


Section One:
Margin, Mark-up, Buy Price, Sell price
     Q1: If you purchase an item for $6.45 and sell it for $14.95 (both
     numbers inclusive of GST), what is your:

           a. Margin % achieved


           b. Margin Dollars achieved


           c. Mark-up


     Q2: Describe the difference between Margin % and Mark-up?

___________________________________________
___________________________________________
___________________________________________
___________________________________________

     Q3: If you purchase an item for $654.00 (excluding GST) and
     want to achieve a margin % of 25 %...what is your sell price
     including GST?




                              Page 1 of 21
      Q4: If you want to sell an item for $12.95 inclusive of GST and
      want to achieve a margin of 25%... what would your buy price be
      excluding GST?




      Q5: When negotiating with suppliers for a „better deal‟ the
      suppliers may offer to give you:

a) A 6% rebate if you purchase over a certain quantity
b) A 1% early settlement rebate and
c) A 1% (of total purchases) contribution to marketing

(All percentages are calculated on total sales ex GST)

You decide to take advantage of all of the individual elements of the
deal.

   a) Does this translate to a 8% improvement in the final margin
   achieved?

              Yes              No


   b) On purchasing 300 units at $12.42 to retail at $19.40 (excluding
      GST) you qualify for a 8% reduction in the cost price… what
      effect does this have on the final % margin you achieve?

To assist you with your calculation complete the following table:

                    No Deal   Margin Deal        Margin Difference
                               %                  %
  Unit Cost
  Unit Sell
  Units 300
  Unit
  margin
  Total
  Margin $

                              Page 2 of 21
Impact on margin achieved is

Note: This indicates that an 8% discount on the purchase price does not transmit
into an 8% improvement in margin



Q6. Complete the following table.

Product        Sell Price        Buy Price Margin                  Mark-up
#1             $23.46            $12.35
#2             $49.56            $39.36
#3             $256.35           $156.69
#4             $695.26           $459.56
#5             $8899.23          $7233.36
#6             $2.36             $1.23
#7             $1.23             $0.75
#8             $6.65             $3.52
#9             $15.23            $9.56


Please proceed to section two below.




                                 Page 3 of 21
Section Two:

Stock productivity

Stock-turn

     Q1. Define Stock-Turn?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
     Q2. If your stock-turn was considered too high what impact
     might this have on the performance of the business what would
     you do to reduce it?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________

     Q3. If your stock-turn was considered too low what impact
     might this have on the performance of the business and how
     would you address this situation?

_____________________________________
_____________________________________
_____________________________________


                              Page 4 of 21
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
      Q4. Given the following information calculate the stock-turn:

Annual sales: $2 400 000 (at full retail)
Average stock on hand: $300 000 (at full retail)
Days forward cover: 37.5
Aged stock: $12 000

Days forward cover

      Q1. Define day‟s forward cover?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
      Q2. Given the following information calculate the day‟s forward
      cover:

Weekly unit sales: 64
5 day trading week
Total trading days: 260
Average stock on hand: 300 units




                              Page 5 of 21
      Q3. If in the above example the supplier demands payment terms
      of 7 days after delivery, how might this impact on the
      performance of the business

_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________

     Q4. In which specific retail environments would you use days
forward cover as apposed to stock turn?

_____________________________________
_____________________________________
_____________________________________
_____________________________________
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_____________________________________
G.M.R.O.I.I, and S.P.I

The two acronyms above are related in some way, different businesses
use one or both of them at different times.




                             Page 6 of 21
        Q1.Can you name them?

G.M.R.O.I.I,___________________________________
__________________________________________
__________________________________________

S.P.I_______________________________________
__________________________________________

        Q2. Given the following information calculate the G.M.R.O.I.I,
        and S.P.I

Dollars Net profit achieved: $1 450 000
Average S.O.H. at cost: $960 000

G.M.R.O.I.I               or


S.P.I


Note: There are a few variations of this measure. If your organisation
uses a slightly different measure don‟t panic. As long as you are
consistent with the measure


Sales and Profit densities

       Q1. One of the most commonly used stock productivity indicators
is sales and profit densities. Explain this term?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________



                                Page 7 of 21
      Q2. Complete the table and comment on the following
information:

Department     Size ( Square     Sales        Profit   Sales     Profit
               Meters)                                 Density   Density
Blue paint            23           25000        8000
Green paint           16           16000        5120
Black paint           23           63000       20160
White paint           25           95000       30400
Yellow paint          16           16000        5120
Pink paint            23            6000       18750

Comment:________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
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_____________________________________
C.T.M and C.T.P

        Q1. What do the above acronyms stand for?

C.T.M
_____________________________________
_____________________________________


                               Page 8 of 21
C.T.P
_____________________________________
_____________________________________

Q2. Can you think of a situation where one might use C.T.P?

________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________
Margin and volume

In almost all retail markets we face the following dilemma:

If I drop my prices (discount more, reduce my price), will I sell more
and what impact does this have on my profitability?

Or

If I raise my prices, will I sell less and what impact will this have on my
profitability?




                               Page 9 of 21
Q1. Complete the following tables and comment

In the first scenario we want to reduce our sell price by 5% and
increase volume sold by 10%


              Regular                            Reduced
              Price                              Price
Selling price $695.00
Buy price     $472.60                            $472.60
Gross profit $222.40
Units sold    100
Total Profit $22210
Difference

In the second scenario we want to increase our sell price by 10% and
decrease volume sold by 20%


              Regular                            Reduced
              Price                              Price
Selling price $695.00
Buy price     $472.60                            $472.60
Gross profit $222.40
Units sold    100
Total Profit $22210
Difference

Comments:________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________


                             Page 10 of 21
Please proceed to section three below.




                   Page 11 of 21
Section Three:

People/staff productivity

Productivity measures:

     Q1. Can you think of four productivity measures you can use to
     monitor the productivity of your sales staff?

1.
_____________________________________

2.
_____________________________________

3.
_____________________________________

4.
_____________________________________

       Q2. Define the term Labour Scheduling and how it is used in a
retail environment?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________




                             Page 12 of 21
       Q3. What does the term F.T.E stand for?
_____________________________________
_____________________________________
       Q4. What does the term R.M.E.C stand for?
_____________________________________
_____________________________________

       Q5. Given the following information calculate the F.T.E.

   -   The standard employment contract for this organisation is 42.5
       hours

   -   The number of hours worked in total by all employees in this
       business for the week is 625.50

   -   There are 18 employees on the payroll

Therefore the F.T.E for this organisation is



The term F.T.E is used to calculate a number of staff ratios including
sales and profit per F.T.E…using the following information calculate
these two ratios.

F.T.E is 7.4
Annual sales $4.5 million
Gross Margin achieved 36%
Expenses as a % of sales are 29%
Net Profit is 7%

Therefore:

Sales per F.T.E.

Net Profit per F.T.E




                               Page 13 of 21
       Q5. What is the Sales and Net profit benchmark per F.T.E for your
retail sector?




Wage costs:

An employee may say that he or she is getting paid $18.00 per hour.
Whilst this is correct this is not the true cost to your organisation.

     Q6. Using the following table calculate the true cost of the hourly
wage bill to the organisation.

Description        Andy       Elaine          Sue      Kathy     Total

Hourly wage        $16.20     $15.90          $14.30   $10.60
Leave pay
Sick pay
A.C.C
Other              $1.25      $1.25           $1.25    $1.25
Total


    Q7. Wage bill analysis: Complete the following table and
comment on the results.

     Year            2003               2004              2005
     Sales           $989,561           $1,234,345        $865,235

     Wages Dollars $158,329             $169,659          $167,256

     Wage %


Comment:________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________




                              Page 14 of 21
________________________________________________________
________________________________________________________


    Q8. What is the wages % benchmark for your industry?




                          Page 15 of 21
Please proceed to section four below.




                   Page 16 of 21
Section Four:

“Statement of Financial Performance” (Profit and Loss)

Cost and cost analysis.

Using the example “Statement of Financial Performance” provided (or
a real live example) comment on and make suggestions on the
elements that you feel need attention.




Please proceed to section five below.


                             Page 17 of 21
Section Five:
“Statement of Financial Position” (Balance sheet)


There are a number of important bits of information contained in a “Statement of
Financial Position”, using the information provided and or a sample balance sheet from
your organisation, combine this with the formulas given, calculate the necessary ratios
and comment on the value of the ratio or the result. This is by no means a full list but
will contain the essential information required

Information provided

Description                                                        Value
Sales                                                              $6 000 000
Capital employed                                                   $1 235 000
Fixed assets                                                       $3 294 999
Average stock on hand                                              $1 200 000
Debtors                                                            $650 000
Trading days                                                       302
Current assets                                                     $2 499 629
Current Liabilities                                                $2 975 000
Equity                                                             $2 496 000
Debt                                                               $2 700 000
Earnings before interest and tax                                   $360 000
Interest payable                                                   $250 000




                                     Page 18 of 21
Formulas
Ratio                  Formula                               Definition
Asset Turnover                      Sales                    Efficiency of resources
                              Capital employed

Fixed Asset turnover                Sales                    Efficiency of fixed asset base
                                 Fixed assets

Working Capital                     Sales                    Efficiency of working capital
                              Net Current assets

Collection period                  Debtors                   Average credit period given
                                 Sales per day

Current ratio                  Current assets                Ability of a company to pay
                              Current liabilities            outstanding debt if called upon

Quick Ratio                Current assets less stock         Ditto above but a more stringent
                              Current liabilities            measure

Debt to equity                       Debt                    Relative indebtedness
                                    Equity

Interest cover         Earnings before Interest and Tax Ability to meet interest payments
                              Interest Payable




                                             Page 19 of 21
Working sheet
Ratio                  Equation                   Comments
Asset Turnover


Fixed Asset turnover


Working Capital


Collection period


Current ratio


Quick Ratio


Debt to equity


Interest cover



                                  Page 20 of 21
Page 21 of 21

				
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