Merchant Finance Official Cheat Sheet

Sales Increase

• Inc = (TY - LY)/LY
• TY = LY * (1 + Inc)
• LY = TY/ (1 + LY)

Average Price

• Avg = Dollars/Units
• Dollars = Units * Avg
• Units = Dollars/Avg

Initial Margin

• MU = (Rtl Cost)/Rtl
• Cost = Rtl * CC or Cost = Rtl * (1 - MU)
• Rtl = Cost/CC or Rtl = Cost/(1 MU)

Note: CC stands for Cost Complement. The formula for Cost Complement is: 1 MU

Markdowns

• MD% = MD$/Sales$
• MD$ = Sales$ * MD%
• Sales$ = MD$/MD%

Maintained Margin Steps for Calculation

• Step 01: Find the initial margin and the cost complement
• Step 02: Convert the retail markdowns to cost markdowns
• Step 03: Subtract the cost markdowns from initial margin

Inventory Turns

• Turn = Annualized Sales/Average Retail Inventory
• Annualized Sales = Average Rtl Inv * Turn
• Avg Rtl Inv = Annualized Sales/Turn
• Turn = 52/WHO
• WOH = 52/Turn

ROI

• ROI = Annualized Gross Profit/Average Cost Inventory
• Annual Gross Profit = Avg Cost Inv * ROI
• Avg Cost Inv = Annual GP/ROI
• ROI = (MM/MMCC) * Turn (approximate shortcut)

Retail Math Volume Homework (You Must Show All Work in order to receive credit.)

3. Excerpts from the financial statements for two furniture stores are below. Calculate the overall and comp sales increases for both companies and compare and contrast the numbers. Comment on the growth and health of each company.

Harrys Furniture				Dead Peoples Stuff
Income Statement				Income Statement
	2019	2020			2019	2020
Sales Store 1	450,000	520,000		Sales Store 1	430,000	510,150
Sales Store 2	210,000	210,750		Sales Store 2	NA	155,500