last word

Basic Retail Formulas

Here are the formulas for 15 tried-and-true calculations you need in order to determine the health of your dispensing business.

1 BREAK-EVEN ANALYSIS:
Fixed Costs ÷ Gross Margin Percentage

2 CONTRIBUTION MARGIN:
Total Sales – Variable Costs

3 COST OF GOODS SOLD:
Beginning Inventory + Purchases – Ending Inventory

4 GROSS MARGIN:
Total Sales – Cost of Goods

5 GROSS MARGIN RETURN ON INVESTMENT:
Gross Margin $ ÷ Average Inventory Cost

6 MARGIN %:
(Retail Price – Cost) ÷ Retail Price

7 INVENTORY TURNOVER:
Net Sales ÷ Average Retail Stock

8 INITIAL MARKUP:
% = (Expenses + Reductions + Profit) ÷ (Net Sales + Reductions)

9 MAINTAINED MARKUP:
MM $ = (Original Retail – Reductions) – Cost of Goods Sold; MM % = Maintained Markup $ ÷ Net Sales Amount

10 MARKUP:
$ = Retail Price – Cost; % = Markup Amount ÷ Retail Price

11 OPEN TO BUY:
Planned Sales + Planned Markdowns + Planned End of Month Inventory – Planned Beginning of Month Inventory

12 QUICK RATIO:
Current Assets – Inventory ÷ Current Liabilities

13 REDUCTIONS:
Markdowns + Employee Discounts + Customer Discounts + Stock Shortages

14 SELL-THROUGH RATE:
% = Units Sold ÷ Units Received

15 STOCK-TO-SALES RATIO:
Beginning of Month Stock ÷ Sales for the Month EB