Exam #1 Flashcards
What are the main headings of a P&L Statement?
Sales, COGS, Gross Profit Margin, Operating Expense, Operating Profit, Taxes, Net Profit
What is another name for Gross Sales?
Gross Revenue, Gross Income, Volume, Sales Dollars, Total Sales
What is another name for Operating Profit?
Profit Before Taxes, Net Income Before Taxes, EBIT (Earnings Before Taxes and Interest)
What is the main difference between a wholesaler and a distributor?
Distributor: works closely with manufacturers to market and sell products
Wholesaler: Primarily buys in bulk from manufacturers or distributors and resells
What historic event greatly aided to the rise of wholesale distributors and other intermediaries?
Industrial Revolution
What is one benefit a manufacturer gets from using a distributor?
- Provides greater reach for products
- Provides local market knowledge and research
- Provide a marketing function for the manufacturer
What is one benefit an end user gets for buying from a distributor?
- Accept refund or grant credits
- Train customers on products
- Product knowledge
What happens when a distributor sets its prices too low?
- Thin profit margins
- Channel conflict
- Unstable market pricing
Why is it getting harder to compete in the distribution world?
- Number of competitors is increasing
- Purchasing decisions are being impacted by growing price pressure
- Internet has changed some business models
What does MRO stand for?
Maintenance, Repair and Operations
What does OEM stand for?
Original Equipment Manufacturing
What is a “Tier 3 Suppler”?
A company that provides raw materials or basic components
What is a VMI?
Vendor Managed Inventory
What is special about an independent rep?
They are self-employed agents who sell products for multiple non-competing manufacturers
What are direct costs?
Expenses that can be directly traced to a specific product
What are indirect costs?
Expenses that support overall operations but cannot be directly traced to a specific product
What are variable costs?
Costs that happen change based on the number of products that are sold
What are fixed costs?
Indirect costs or overhead expenses that that aren’t dependent on the number of products sold
What are semi-variable costs?
Include both a fixed and variable portion
What can be deducted from Gross Sales Dollars and get Net Sales Dollars?
- Returns
- Allowances
- Discounts
What are Cost of Goods Sold?
What we pay for the product
What are operating expenses?
What we have to pay to stay in business
What are Gross Margin Dollars?
The money a business retains after product costs
How do I calculate Gross Sales Dollars?
Number of Items X Selling Price of the Items = Gross Sales
How do I calculate Net Sales Dollars
Gross Sales Dollars – Cost of discounts, returns, mistakes = Net Sales Dollars
How do I calculate Gross Margin Dollars?
Total Sales (or total sales revenue or gross sales dollars) - COGS = Gross Margin Dollars
How do I calculate Gross Margin?
Gross Margin Dollars / Gross Sales = Gross Margin
What is the difference between Gross Margin (or commonly just called Margin) and Mark-up
- Gross Margin = Gross Margin Dollars / Gross Sales
- Mark-up = Gross Margin Dollars / COGS
How do I convert Gross Margin to Mark-up?
Mark-up = Gross Margin / 1 – Gross Margin
How do I convert Mark-up to Gross Margin?
Gross Margin = Mark-up / 1 + Markup
What is operating profit?
Gross Margin – Operating Expenses = Operating Profit
What is the general order of the P&L Statement?
- Revenue
- Cost of Goods Sold
- Gross Margin Dollars
- Operating Expenses
- Selling Expense
- General/Administrative Expense
- Operating Profit
- Net Profit
