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.)

1. Pick-Up Sticks, an online childrens toy store, has the following in their financial statements for 2018 and 2019:

2019 Sales: $4 million

2018 Sales: $2 million

A careful reading of the financials shows that $3 million of their 2019 sales come from a new channel 20 brick and mortar stores the company didnt have in 2018 and which have only been open for 10 months.

What is their overall sales increase in 2019? What is their comp sales increase in 2019? How healthy is this chain?