Chapter 4-Reporting and Analyzing Merchandising Operations

Gross Profit/Margin

=Net Sales-COGS

Inventory Systems

Beginning inventory + net purchases = merchandise available for sale = ending inventory + cost of goods sold

Merchandiser

Entity that earns income by buying and selling merchandise.

Merchandiser reports....

Goss Profit/Margin

Merchandisers are...

Wholesalers or Retailers

Operating Cycle for a Merchandiser

1. Purchases 2. Merchandise inventory 3. Credit sales 4. Accounts receivable 5. Cash collection

As owner of Telo, a startup business, you are struggling to generate enough gross profit to compete with Creft and Wozz. Also, your business frequently runs low on cash. To help determine how to fix these issues, you review the following Tableau Dashboard. 1. Compute gross profit for each company. 2. Which company has negotiated the best credit terms with suppliers? Note: Suppliers in this industry do not offer purchase discounts. 3. Which company has the largest customer returns and allowances?

1. Telo- $4000 Creft- $14000 Wozz- $18000 2.Wozz 3.Telo

As owner of Telo, a startup business, you are struggling to generate enough gross profit to compete with Creft and Wozz. Also, your business frequently runs low on cash. To help determine how to fix these issues, you review the following Tableau Dashboard. 1. Which company offers customers the fewest days for returns? 2. Which company offers customers the most days to pay for credit sales? 3. Compute gross profit for Telo.

1. Wozz 2. Telo 3. $4000 (85,000-6,000-15,000=64,000) Net Sales=64,000 COGS=60,000 NS-COGS=$4000

COGS (Cost of Goods Sold) AKA COS (Cost of Sales)

Expense of buying and preparing merchandise

Merchandise

Goods that a company owns and expects to sell to customers; AKA Merchandise Inventory or Inventory.

Wholesaler

Intermediary that buys products from manufactures or other wholesalers and sell them to retailers or other wholesalers.

Retailer

Intermediary that buys products from manufactures or wholesalers and sells them to consumers

Merchandiser

Net Sales - COGS = Gross Profit - Expenses = Net Income COGS: Cost of goods sold

Example of Merchandising Company: NORDSTORM INC. Income Statement

Net Sales: $14,757 COGS: 9,440 --------- Gross Profit: 5,317 Expenses: 4,963 ----------------------- Net Income: $354

Periodic Inventory System

Records cost of goods at the end of the period.

Perpetual Inventory System

Records cost of goods sold at the time of each sale.

(Net) Sales

Revenue from selling merchandise

Service Company

Revenues - Expenses = Net Income

Example of Service Company: LIBERTY TAX Income Statement

Revenues: $174 Expenses: 162 ------------------ Net Income $12