Understanding Retail Profit & Loss

Understanding Retail Profit & Loss

Understanding Retail Profit & Loss

Once you have viewed our lesson on Basic Math Concepts for Retail Buying you are ready to learn about various factors that affect retail profit and loss. You will learn the definitions of the common terms used in buying such as cost price, net sales, Cost of Goods Sold, and what Operating Expenses encompasses. By using actual examples you will learn the relationship of the cost of the merchandise sold to the net sales and why that is an important factor in determining whether a business will earn a profit.

Module Description Step
1 Profit & Loss Terminology 1-11
2 Gross Margin & Operating Expenses 1-13
3 Terms of Sale/Discounts 1-11
4 Markdowns 1-11
5 Markup 1-5
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MODULE 1 • Profit & Loss Terminology

Step Description
1 Now that we know the basic math manipulations used for planning, buying and allocating merchandise, we will look at the factors that affect Profit.
2 Let’s start with a definition of some of the common terms used in buying.
3 Common Buying Terminology

Cost or cost price: is the amount the retailer pays for these purchases.

Retail or retail price: is the price at which the stores offer merchandise for sale.

Merchandise department: is a group of related merchandise for which separate expense and merchandising records are kept for the purpose of determining the profit of this grouping.

Markup: is the difference between the amount the retailer pays a vendor or manufacturer and retail price sold to the end consumer. (It could be stated in dollars or percent).

Markdown: is a reduction in the original or previous retail price of an item or group of items.


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