Exam 2 Ch. 6, 7, 8, 10, 14

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

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

Operating profit margin (in %) =?

((Gross margin − Operating expenses) / Net sales ) x 100

What three things should be included in performance objectives?

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

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

- asset turnover - profit margin

What are three ratios that are useful in the profit margin management path?

- gross margin percentage - operating profit margin as a percentage of sales - operating expenses as a percentage of sales

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

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

How is gross margin (in %) used by retailers?

- to compare their performance with that of other retailers with higher levels of sales - to compare the performance of various types of merchandise - to compare their performance with that of other retailers with lower levels of sales

What is included in cash and cash equivalents?

-checks -currency -investments that mature within three months or less

_____ is the real estate industry's term for the total floor area designed for the retailer's occupancy and exclusive use, including any basements, mezzanines, or upper floors.

Gross leasable area (GLA)

Operating profit margin =?

Gross margin - Operating expenses

_____ is not a retailer's operating expense.

Income tax

What is true of asset turnover?

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

Identify the accurate statement about location decisions in retailing.

Location decisions can be used by retailers to develop a sustainable competitive advantage.

Which statement is TRUE regarding performance objectives and measures?

Many factors contribute to a retailer's overall performance.

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

Merchandise

What is NOT the responsibility of store managers?

Merchandise inventory

What is the critical resource controlled by merchandise managers?

Merchandise inventory

Who has the authority to set initial prices on goods and lower those prices if sales begin to slow down?

Merchandise manager

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

A(n) ________ measure determines how effectively retailers use their resources.

Productivity

What is the formula for calculating return on assets?

Return on assets = Net profit margin / Total assets

What is true of the financial objectives of a firm?

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

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

Slotting allowances

______ - ______ planning means that goals of an organization are set at the top and are passed down to the lower operating levels.

Top-Down

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

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

True or false: The societal objectives of a firm are related to broader issues that make the world a better place to live.

True

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

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

The upkeep of facilities at a shopping center such as the parking area, lighting, and outdoor signage is referred to as ______ _______ _______ (CAM).

common area maintenance

Assets that can normally be converted to cash within one year are called ________ 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

_____ is an unplanned retail store location.

freestanding site or urban location or main street location

Gross margin is also called _____.

gross profit

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) ______ statement summarizes a firm's financial performance over a period of time, typically a quarter or year.

income

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

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

All of the following are fixed assets EXCEPT ______. -buildings -merchandise inventory -display racks -delivery trucks

merchandise inventory

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

merchandise inventory

Net profit margin is also called _____ ______

net income

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 _______ assets.

noncurrent

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

output

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

output

In _____ locations, the shopping center management is responsible for providing security, parking lot lighting, outdoor signage for the center, advertising, special events to attract consumers, and so on.

planned

In a(n) _____ location, the shopping center developer and/or manager makes and enforces policies that govern store operations, such as the hours that a store must be opened.

planned

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 ______. -cost of goods sold -interest and taxes -net sales -productivity and output

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

The strategic profit model summarizes the factors that affect a firm's financial performance as measured by ______.

return on assets

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

sales

Comparable-store sales growth is also known as _______-______ sales growth.

same-store

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. Multiple choice question.

slotting

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

statement of operations

What is typically one of the most influential considerations in a customer's store choice?

store location

The use of store space and the management of store employees is the responsibility of the ______.

store manager

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

strategic profit

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

At each level of the business organization, ______ should be held accountable for only the revenues, expenses, cash flow, and contribution to ROA that they can control.

the business unit and its manager

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

The trade area is _____.

the geographic area that encompasses most of the customers who would patronize a specific retail site

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

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

A(n) ______ location does not have any centralized management that determines what stores will be in a development.

unplanned

Freestanding and urban sites are ________ locations occupied by retail stores. (planned/unplanned)

unplanned

What is the difference between a firms' financial and societal objectives?

Financial objectives can be easily measured when compared to societal performance objectives.

What are two sets of activities that determine ROA?

1. asset turnover 2. profit margin

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

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%

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%

______ - ______ 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

What is an example of 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 - Reason: This objective does not provide specific goals that can be used to evaluate performance.

Which of the following is NOT an operating expense? -Salaries for sales associates -The occupancy cost incurred by a retailer -The cost of merchandise -Selling, general and administrative expenses

The cost of merchandise

What 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.

What 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.