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Retail Math Formulas

Equations to Calculate Retail Sales and Stock


Equations on Blackboard
Jeffrey Coolidge/ Iconica/ Getty images

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

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

Average Inventory

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

Basic Retailing Formula

Cost of Goods + Markup = Retail Price
Retail Price - Cost of Goods = Markup
Retail Price - Markup = Cost of Goods

Break-Even Analysis

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

Contribution Margin

Contribution Margin = Total Sales - Variable Costs

Cost of Goods Sold

COGS = Beginning Inventory + Purchases - Ending Inventory

Gross Margin

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 %

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


Markup $ = Retail Price - Cost
Markup % = Markup Amount ÷ Retail Price

Net Sales

Net Sales = Gross Sales - Returns and Allowances

Open to Buy

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

Percentage Increase/Decrease

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

Quick Ratio

Quick Ratio = Current Assets - Inventory ÷ Current Liabilities


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

Sales per Square Foot

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

Sell-Through Rate

Sell-Through % = Units Sold ÷ Units Received

Stock to Sales Ratio

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

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