Retailing exam 2 chapter 6

If a retail store's asset turnover is 4.0, it generates _____.

$4 in sales for each dollar invested in the firm's assets

What three things should be included in performance objectives?

1. a numerical index of the performance desired against which progress may be measured 2. the resources needed to achieve the objective 3. a time frame within which the objective is to be achieved

Firms can achieve high performance (high ROA) by effectively managing what two items?

1. asset turnover 2. profit margin

Which of the following are included in cash and cash equivalents? (select all that apply)

1. investments that mature within three months or less 2. checks 3. currency

Select from the following the three ratios that are useful in the profit margin management path.

1. operating expenses as a percentage of sales 2. gross margin percentage 3. operating profit margin as a percentage of sales

Select from the following the two sets of activities that determine ROA.

1. profit margin 2. asset turnover

How is gross margin (in %) used by retailers? (select all that apply)

1. to compare the performance of various types of merchandise 2. to compare their performance with that of other retailers with higher levels of sales 3. to compare their performance with that of other retailers with lower levels of sales

Before moving on, you must review a resource for this question.

1. to compare the performance of various types of merchandise 2. to compare their performance with that of other retailers with lower levels of sales 3. to compare their performance with that of other retailers with higher levels of sales

The net sales and the value of assets of a small retail store are $400,000 and $200,000, respectively. Calculate the asset turnover of the store.

2.0 (400/200)

A retail store's gross margin, operating expenses and net sales are $50,000, 20,000 and $120,000, respectively. Determine the store's operating profit margin percentage.

25% (50-20 =30) (30/120=0.25)

For an investment to be included in "cash and cash equivalents," it must mature within ______.

3 months

A retail store's operating expenses and net sales are $50,000 and $125,000, respectively. Determine the store's operating expenses percentage.

40% (50/125)

Last year, a retailer had net sales that totaled $180,000. The cost of goods sold was $70,000. Operating expenses were rent $4000, payroll $20,000, utilities $2000, and advertising $1200. Calculate the operating profit percentage.

46%

A firm's cost of goods sold and average inventory at cost during a year are $85,000 and $17,000, respectively. Determine the firm's inventory turnover.

5.0 (85/17)

A firm's operating expenses and net sales are $100,000 and $200,000, respectively. Determine its operating expenses percentage.

50%

A firm's cost of goods sold and average inventory at cost during a year are $63,000 and $9,000, respectively. Determine the firm's inventory turnover.

7.0 (63/9)

In terms of the asset management plan, what would happen if Nordstrom were to decrease the dollar amount of inventory in its stores?

Asset turnover will increase.

_______________ ____________ planning involves lower levels in the company developing performance objectives that are aggregated up to develop overall company objectives.

Bottom up

______ compares sales growth in stores that have been open for at least one year.

Comparable-store sales growth

Which of the following is an operating expense?

Employee salaries

True or false: The statement "Our firm would like to earn a reasonable profit." is a good performance objective.

False

________ is a measurement of how much profit the retailer is making on just the merchandise sold.

Gross margin

Operating profit margin =?

Gross margin - Operating expenses

Operating profit margin (in %) =?

Grossmargin-Operatingexpenses/Netsales X 100

Which of the following is true of setting objectives in a large retail organization?

In the top-down approach, the overall performance objectives are formed as an aggregation of individual performance objectives.

_____ is not a retailer's operating expense.

Income tax

Which of the following is true of asset turnover?

It measures the productivity of a retailer's investment in its assets.

Which statement is TRUE regarding performance objectives and measures?

Many factors contribute to a retailer's overall performance.

Net profit margin is also called __________________ ________________

Net income

Return on assets =?

Net profit margin (in %) x Asset turnover

Identify the formula used to calculate gross margin.

Net sales - Cost of goods sold

How is asset turnover calculated?

Net sales divided by total assets

_____ include selling, general, and administrative overheads.

Operating expenses

When evaluating the performance of a retailer, what is the best financial performance measurement to utilize?

Return on assets

What is the formula for calculating return on assets?

Return on assets = Net profit margin / Total assets

Which of the following is true of the financial objectives of a firm?

Return on assets can be used to evaluate the financial performance of a firm.

Comparable-store sales growth is also known as _________ ________ sales growth.

Same store

_____ is/are an additional source of revenue for a retailer that is related to merchandise sales.

Slotting allowances

The best benchmark for the off-price retailer Ross, would be

TJ Maxx.

Which of the following is NOT an operating expense?

The cost of merchandise

Which of the following statements is TRUE about inventory turnover?

The inventory level reported on the balance sheet is the level on the last day of the fiscal year, not the average level.

True or false: In a retailing organization, top-down planning involves corporate officers developing an overall retail strategy and assessing broad economic, competitive, and consumer trends.

True

Store managers focus mainly on what type of performance input?

Utility expenses

Asset turnover is _____.

a retailer's net sales divided by its assets

Cost of goods sold is the _____.

amount a retailer pays to vendors for the merchandise the retailer sells plus transportation costs

The intangible assets of a retailer _____.

are used to develop a sustainable competitive advantage

Economic resources owned or controlled by a firm are its _____________

assets

The ________ is primarily used to obtain information to analyze a retailer's asset management path.

balance sheet

A _____ is levied by retailers on a vendor when the merchandise bought from the vendor does not meet all the terms of the purchase agreement.

chargeback fee

Ty, Inc. needed its shipment of widgets from A-1 Widgets to arrive on December 1st as was stated in the contract. The widgets did not arrive until after the first of the year. Ty, Inc. is entitled to have A-1 Widgets pay a ______.

chargeback fee

Additional revenues received by a retailer that relate to merchandise sales include _____.

chargeback fees

Accounts receivable and merchandise inventory are examples of retailer's ________ assets that can be converted into cash within one year.

current

Assets that can normally be converted to cash within one year are called a ______________ assets.

current

Cash, merchandise inventory, and accounts receivable are all ______ assets.

current

What are the two classifications of assets?

current and noncurrent

A retailer could increase its asset turnover by ______.

decreasing the dollar amount of inventory

Operating profit margin is also referred to as

earnings before interest, taxes, and depreciation (EBITDA).

Buildings, display fixtures, delivery trucks, cash registers, and computers are examples of retailer's ________ assets.

fixed

A retailer like Walmart that sells basic merchandise at low prices typically would have a_________________(higher/lower) inventory turnover than fashion apparel sold by retailers like Nordstrom.

higher

A(n) ____________________, Incorrect Unavailable statement summarizes a firm's financial performance over a period of time, typically a quarter or year.

income

The ________ is used to obtain information to analyze a retailer's profit margin management path.

income statement

Gross margin _____.

indicates how much profit a retailer is making on merchandise sold

The amount and selection of merchandise inventory, the number of stores, size of the stores, the employees, advertising, markdowns, store hours, and promotions are all examples of retailers' ________ measures.

input

The amount and selection of merchandise inventory, the number of stores, the size of the stores, the employees, advertising, markdowns, store hours, and promotions are examples of _____ measures.

input

The resources or money allocated by a retailer to achieve outputs or results are referred to as ___________ measures.

input

The _____________assets of a retailer cannot be objectively measured.

intangible

Which type of asset is NOT included in the calculation of return on assets (ROA)?

intangible assets

In calculating net profit margin, what would be subtracted from the operating profit margin?

interest and taxes

The primary reason a retailer exists is to sell its __________ inventory.

merchandise

The primary reason a retailer exists is to sell its ___________ inventory.

merchandise

All of the following are fixed assets EXCEPT ______.

merchandise inventory

Which of the following is considered a retailer's lifeblood since it directly relates to the reason why a retailer exists?

merchandise inventory

How much profit (after taxes, interest income, and extraordinary gains and losses) a firm makes divided by its net sales is called ______.

net profit margin

Gross margin percentage is gross margin divided by _____.

net sales

Operating expenses percentage is operating expenses divided by _____.

net sales

Assets that are owned or controlled by a firm and are not likely to be converted to cash within one year are referred to as

noncurrent

Costs, other than the cost of merchandise, incurred in the normal course of doing business, such as salaries for sales associates and managers, advertising, utilities, office supplies, and rent are ______ called expenses.

operating

Net profit margin is

operating profit margin minus taxes and interest.

Because retailers differ in size and make different decisions regarding their taxes and capital structures, analyzing ________ is the best way to compare the performance of one retailer to the performance of another retailer.

operating profit percent

Measures that assess the results of a retailer's investment decisions are called __________ measures.

output

Sales revenue, gross margin, and net profit margin are all examples of retailers' ________ measures.

output

Sales revenue, gross margin, and net profit margin are examples of __________ measures.

output

An illustrator finds it rewarding to convert stories into picture books and make them come alive for the children buying his books. In doing so, he fulfills his ________ objectives.

personal

A __________ measure is the ratio of an output to an input.

productivity

All of the following are components of the profit margin management path EXCEPT ______.

productivity and output

A high ______ can be achieved by various combinations of net profit margin percentages and asset turnover levels.

return on assets

The profit generated by the assets possessed by a firm is referred to as ______.

return on assets

A retailer focusing on the profit margin management path, could increase the operating profit margin by increasing ______.

sales

Operating expenses would include all of the following except

shipping expense from the vendor to the retailer.

The strategic profit model suggests that when evaluating financial performance, retailers and investors ______.

should consider both operating and net profit margin and asset turnover

Retailers often charge vendors for space in their stores. This is known as a______________ fee or allowance.

slotting

The makers of the juice drink, CapriSun noticed its sales were not as high as they expected. The company attributed this to the fact that its drinks were placed on the bottom shelf of grocery stores. To improve sales, the makers of CapriSun paid its retailers a ______ allowance so they would place its juice drinks on the middle shelves at the consumers eye-level.

slotting

A food retailer buys 80% of his stock from local producers and employs people from the same region. In doing so, he fulfills the ________ objectives.

societal

The retailer's income statement is also known as the _____.

statement of operations

The _____ model is a method for summarizing the factors that affect a firm's financial performance, as measured by return on assets.

strategic profit

A decrease in same-store sales indicates

that the retailer's business approach is not being well received by its customers.

John, a retailer wants to calculate his firm's net sales. John knows the total amount of revenue the company has taken in from selling merchandise, but what other item must John take into consideration?

the amount of any returned merchandise, discounts or credits given to customers

Inventory turnover is _____ during a time period, typically a year, divided by the average level of inventory at cost during the time period.

the cost of goods sold

It is helpful to use ratios with net sales in the denominator when evaluating a retailer's performance relative to its competition because some of the differences in income statement numbers are due to ______.

the difference in the size of the retailers

Retailing management decisions typically focus on the operating profit margin because it reflects ______.

the performance of the retailer's fundamental operations

Net sales, cost of goods sold, gross margin, operating expenses, interest and taxes, and net profit margin are all components of ______.

the profit margin management path

A store's net profit margin reflects ______.

the profits generated from each dollar of sales

The measures used to evaluate retail operations vary depending on which two factors?

the resources the manager can control the level of the organization at which the decision is made

For a retailer, net sales is defined as _____.

the total revenue received that is related to selling merchandise minus any returns, credits or discounts

In calculating cost of goods sold, the retailer takes the amount it paid to vendors for the merchandise and adds in any costs incurred for ______.

transportation

True or false: In bottom-up planning, buyers and store managers estimate what they can achieve, and their estimates are transmitted up the organization to the corporate executives.

true