Exam 2 Flashcards
Selling price =
List price - trade discounts
Net price =
Selling price-allowable discounts(cash discounts)
Net sale =
Actual money received after discounts and adjustments
COGS
cost of merchandise sold+ any freight charges from the manufacturers
Trade discounts
Means of adjusting the price for variations in the cost of raw material
Trade pricing
Involves negotiating the actual price that will be paid
Cash discounts
Offered to encourage early payment
Special orders
Consist of standard products w slight modifications in design finish materials and packaging
Minimum order
The minimum amount that must be ordered
Freight allowed
The amount that must be purchased to have the manufacturer pay the cost of the freight for a standard shipment
Cash flow
Cash in the bank leads to purchased inventory that leads to sold inventory then while we wait for the money we put it into accounts receivable then customer pays us and goes back to cash in the bank
Gross margin
Difference between what a distributor pays for an item and the amount received from its sale
Selling price- COGS - adjustments
Margin dollars
Used to pay employee cost and wages benefits and all other costs of doing business, should generate sufficient funds for a reasonable profit
Percent gross margin (pgm) -GM%
(Selling price-COGS)/selling price ) x100
Markup
How much money the distributor adds of cOGS
OE Operating Expenses
All the cost necessary to provide services to a customer(warehouse cost,inventory holding cost, transportation cost and bad debt expense )
Selling, general, and administrative expense (SG&A)
Include salaries, commissions, and all other payroll costs, and travel cost entertaining cost advertising cost
EBITDA
= Margin-OE- SG&A
Margin
What we use to pay
EBIT
= EBITDA - Depreciation and Amortization
(Represents profit before the interest and taxes are subtracted)
NPBT
net profit before tax , = EBIT- interests
NPAT
Net profits after tax, represents the money which the owner can spend, distribute among the shareholders or reinvest in to company
Accounts payable
The money the distributors owe for products purchased for the manufacturer
Accounts receivable
Money customers owe distributors for goods and services provided to them( this is the ONLY interest free debt for our customers)
Days sales outstanding
(Receivable dollars *365)/(sales)
Inventory turn
When item is purchased>put into inventory>sold>collected(after its in accounts receivable)>another item is purchased. (COGS from inventory)/(avg warehouse inventory)
Gross margin return on inventory investment
(Gross margin dollars earned on warehouse sales)/ (avg warehouse inventory )
