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
