Math: The Universal Language


For those of you who maybe didn't know - math is everything.While you might be moaning and groaning (trust me you're not alone), it's simply something that we have to endure if we ever want to land a job in any field of the industry. Retail math is something that is used throughout the workforce from buyers to retail management. A series of equations and ratios, retail math is used to determine how fast inventory is selling, if the product you're selling produced a profit, and which products (or departments) have the greatest impact on sales.

Valerie Lipow so wonderfully outlines some of the principles of retail math:
  • Calculating markup based on cost or selling
  • Calculating retail sales, gross margin, and break-even points
  • Planning and controlling price/stock reductions (markdowns)
  • Forecasting cash flow budgets                               

Here are a few basic equations:                                                

// NET SALES

net sales = gross sales - returns and allowances


// RETAIL PRICE

retail price = cost of goods + markup

// MARKUP

markup $ amount = retail price - cost
markup % amount = markup amount ÷ retail price

//  INITIAL MARKUP

initial markup % = (expenses + reductions + profit) ÷ (net sales + reductions)

// BREAK EVEN ANALYSIS

break-even ($) fixed cost gross ÷ margin percentage

// INVENTORY

average inventory = (beginning of month inventory + end of month inventory) ÷ 2

average inventory fiscal year = (beginning month inventory + first month + ...12 month) ÷ 13

for more formula's head to maeok.
also check out Shari Waters for a quick guide in learning percents or -
head over to the Terminology page for a full look at retail math.

now bust out those calculators and get to work!

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