Retail math is often used in various ways by store owners, managers, retail buyers and other retailing employees. It is used to evaluate inventory purchasing plans, analyze sales figures, add on markup and apply markdown pricing to plan stocks.

Although there are computer programs and other tools available, performing these retail math calculations often requires familiarity with formulas. Use the following equations and retail math formulas to track merchandise, measure sales performance and help create pricing strategies.

Acid-Test Ratio = Current Assets - Inventory ÷ Current Liabilities

**Average Inventory**

Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory) ÷ 2

Cost of Goods + Markup = Retail Price

Retail Price - Cost of Goods = Markup

Retail Price - Markup = Cost of Goods

Break-Even ($) = Fixed Costs ÷ Gross Margin Percentage

Contribution Margin = Total Sales - Variable Costs

COGS = Beginning Inventory + Purchases - Ending Inventory

Gross Margin = Total Sales - Cost of Goods

**Gross Margin Return on Investment**

GMROI = Gross Margin $ ÷ Average Inventory Cost

**Initial Markup**

Initial Markup % = (Expenses + Reductions + Profit) ÷ (Net Sales + Reductions)

**Inventory Turnover** (Stock Turn)

Turnover = Net Sales ÷ Average Retail Stock

**Maintained Markup**

MM $ = (Original Retail - Reductions) - Cost of Goods Sold

MM % = Maintained Markup $ ÷ Net Sales Amount

Margin % = (Retail Price - Cost) ÷ Retail Price

Markup $ = Retail Price - Cost

Markup % = Markup Amount ÷ Retail Price

**Net Sales**

Net Sales = Gross Sales - Returns and Allowances

OTB (retail) = Planned Sales + Planned Markdowns + Planned End of Month Inventory - Planned Beginning of Month Inventory

% Increase/Decrease = Difference Between Two Figures ÷ Previous Figure

Quick Ratio = Current Assets - Inventory ÷ Current Liabilities

**Reductions**

Reductions = Markdowns + Employee Discounts + Customer Discounts + Stock Shortages

Sales per Square Foot = Total Net Sales ÷ Square Feet of Selling Space

Sell-Through % = Units Sold ÷ Units Received

**Stock to Sales Ratio**

Stock-to-Sales = Beginning of Month Stock ÷ Sales for the Month