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Acid-Test Ratio: Current Assets

This document provides definitions and formulas for various retail math calculations. These calculations are used by retail professionals to evaluate inventory purchasing, analyze sales figures, determine pricing through markups and markdowns, and measure performance. Some of the key retail math formulas included are: cost of goods sold, gross margin, initial markup, maintained markup, margin percentage, markup, net sales, and percentage increase/decrease.

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Qaiss Aslam
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42 views2 pages

Acid-Test Ratio: Current Assets

This document provides definitions and formulas for various retail math calculations. These calculations are used by retail professionals to evaluate inventory purchasing, analyze sales figures, determine pricing through markups and markdowns, and measure performance. Some of the key retail math formulas included are: cost of goods sold, gross margin, initial markup, maintained markup, margin percentage, markup, net sales, and percentage increase/decrease.

Uploaded by

Qaiss Aslam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Retail math is often used in various ways by store owners, managers, retail buyers and

other retailing employees. It is used to evaluate inventory purchasing plans, analyze sales
figures, add on markup and apply markdown pricing to plan stocks.

Although there are computer programs and other tools available, performing these retail
math calculations often requires familiarity with formulas. Use the following equations and
retail math formulas to track merchandise, measure sales performance and help create
pricing strategies.

Acid-Test Ratio
Acid-Test Ratio = Current Assets - Inventory ÷ Current Liabilities

Average Inventory
Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory) ÷ 2

Basic Retailing Formula


Cost of Goods + Markup = Retail Price
Retail Price - Cost of Goods = Markup
Retail Price - Markup = Cost of Goods

Break-Even Analysis
Break-Even ($) = Fixed Costs ÷ Gross Margin Percentage

Contribution Margin
Contribution Margin = Total Sales - Variable Costs

Cost of Goods Sold


COGS = Beginning Inventory + Purchases - Ending Inventory

Gross Margin
Gross Margin = Total Sales - Cost of Goods

Gross Margin Return on Investment


GMROI = Gross Margin $ ÷ Average Inventory Cost

Initial Markup
Initial Markup % = (Expenses + Reductions + Profit) ÷ (Net Sales + Reductions)

Inventory Turnover (Stock Turn)


Turnover = Net Sales ÷ Average Retail Stock
Maintained Markup
MM $ = (Original Retail - Reductions) - Cost of Goods Sold
MM % = Maintained Markup $ ÷ Net Sales Amount

Margin %
Margin % = (Retail Price - Cost) ÷ Retail Price

Markup
Markup $ = Retail Price - Cost
Markup % = Markup Amount ÷ Retail Price

Net Sales
Net Sales = Gross Sales - Returns and Allowances

Open to Buy
OTB (retail) = Planned Sales + Planned Markdowns + Planned End of Month Inventory -
Planned Beginning of Month Inventory

Percentage Increase/Decrease
% Increase/Decrease = Difference Between Two Figures ÷ Previous Figure

Quick Ratio
Quick Ratio = Current Assets - Inventory ÷ Current Liabilities

Reductions
Reductions = Markdowns + Employee Discounts + Customer Discounts + Stock Shortages

Sales per Square Foot


Sales per Square Foot = Total Net Sales ÷ Square Feet of Selling Space

Sell-Through Rate
Sell-Through % = Units Sold ÷ Units Received

Stock to Sales Ratio


Stock-to-Sales = Beginning of Month Stock ÷ Sales for the Month

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