L9 Flashcards
Initial operation
Install telephone office supplies promote the shop opening buy insurance pay liscense, permit and miscellaneous fees
acquainted with the finance
- initial capitals working captital reserve capital promotional capital gowth capital
initial capital
need this to start new business to buy over from someone else or to sign up with franchiser
working capital
to purchased goods for stock to pay salaries
reserve capital
funds that for those unexpected contingencies that crop up from time to time
prrmotional capital
fund that get business off the ground and ensure viability
growth capital
a form of capital that use for some future date
Budgetary control
- a plane that estimate future sales espenses
actual figures are to compared with estimated to determine how well specific area are staying with estimates
3 types budgetary control
operating budget
cash budget
capital budget
Sales budget
developing forecast on experience and knowledge of the field
inputting from supplier and sales staff
past sales report
merchandise budget
-stock to accommodate sales pattern
difficult to operate at a constant retail inventory level
season variation
Expenses budget
fixed and variable expenses
fixed - do not vary with volume of the business e.g insurance , depreciation , property tax
variable - vary in direct proportion to biz volume e.g sales commission, advertising and delivery expenses
cash budget
enable small biz to increase operational performance
ensure sufficient fund for buying merchandise paying all operating expenses and future growth
Capital bUdget
ensure sufficient funds for future growth
evaluated by :
- sales and mark downs
- inventory and stock turn over
- stock shortage
- gross margin
mark down
sales figures below estimated will have an excess merchandise
it’s effective to speed up the sales of merchandise or dispose merchandise that is unsaleable at it present price
Inventory
- key to profitability
- impt to know amount of stock on hand and make appropriate decision
- carry out periodic inventory of perpetual inventory
Stock turn over
too much inventory = excessive markdowns if merchandise can’t be sold
too little leaf to list of sales
to measure how fast merchandise is sold and replace and its ability to meet cash obligations
increase stock turn over
- carry minimum slow moving merchandise or do not sell them at all
reduce no. of lines carried and concentrate on key merchandise
nego w supplier to speed up deliveries or merchandise ordered
reduce price and increase sales promotion
stock shortage
- diff between book value and physical count
- unavoidable and reduce gross margin
attempt to minimise by recognising reason why it occur by taking measures to prevent
can be due to staff error, error in selling, theft , error in stock count or poor housekeeping
Gross margin
difference between net sales and cost of good sold
high to cover operating expenses
improve gross margin
- sell exclusive merchandise to enhance sales and discourage price comparison
- sell more higher margin merchandise
- reduce markdowns and discount
- reduce merchandise shortage
evaluate retail performance
2 tools
balance sheet ( accountant it’s the statement of financial condition of format given point in time ) income statement
net worth formula
Assert - liability’s
cash flow statement
cash receipt -disbursement = net cash flow
positive or negative cash flow
excess or lack
