Calculation of a few commonly used profitability
indicators:
Gross
Margin:
GM % = (Selling Price - Cost) x 100 / Selling Price
Example: You sold an item for $49.95, and the cost of the item is
$30.00.
GM % = (49.95 - 30.00) x 100 / 49.95 =
39.94%
Retail Math-Made Simple
3rd
Edition:
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complete formulas and full explanation
of how to use
them. More Info
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Mark Up:
Mark Up % = (Selling Price - Cost) x 100 / Cost
Using the above example,
Mark Up % = (49.95 - 30.00) x 100 / 30.00 =
66.5%
Calculation of a Quick
Inventory Level:
Weeks of Stock:
Inventory (at retail) divided by average weekly sales for
a given period of time.
So, if you have $8,000.00 worth of inventory in one
product, and your total sales of that product for the past
6 weeks is $12,000.00 the calculation would look like this:
$12,000.00 divided by 6 = average weekly
sales of $2,000.00
$8,000.00 divided by $2,000.00 = 4
This means that if you did not replenish your inventory
and sales continued at the same pace, you would deplete your
inventory of that product to zero within 4 weeks.
Arguably, the most
important retail success
indicator:
Gross Margin Return on Inventory Investment (GMROII):
GMROII = GM% x (Sales / Avg. Inventory)
Example: Still using
the same numbers from Gross Margin calculation, assume that the store's net sales
over a period of 12 months is 24M and during this time it carries an average
inventory of 6M. Then:
GMROII % = 39.94 x (24 / 6) =
159.76%
For other Gross Margin Return
Calculations like GMROF and GMROL refer to the Success Guide: Retail Math Made
Simple 3rd Edition.
Retail Math-Made Simple
3rd Edition:
Now
you can buy the book with
complete formulas and full explanation
of how to use
them. More Info
$17.95 (Fast, Electronic delivery to
your email in pdf format)

For Printed version, DVD or Webinar options, go
here
Retail math is considered an integral part of a good retail manager's skill
set. It can be found on some companies'
pre-employment screening tests.
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