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Questions and Answers
What factor does NOT impact sales forecasting?
What formula is used to calculate Gross Margin Return on Inventory (GMROI)?
Which of the following contributes to a decline in the Average Selling Price (ASP)?
What is a potential consequence of excessive markdowns in sales?
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What do OBSL reserves utilize to make financial decisions?
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Which situation could cause the Average Selling Price to fall below the planned price?
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What is the main disadvantage of poor management of discounts?
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What does GMROI indicate about a company's inventory investment?
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Study Notes
Sales Against Budget and Previous Year
- Sales performance is compared to previous year and budget targets
- Forecasting considers variables like market trends, commodity price increases, and political stability.
- Examples include omnichannel retail, digitalization, Hong Kong and Thailand political unrest, potential electricity price increases in 2019, and expected changes in tax rates like Singapore's GST increase between 2021-2025
- Trend analysis also includes forecasting changes in fashion trends and consumer eating habits (e.g., plant-based meat).
Stock Turn
- Stock turn reflects the efficiency of inventory management.
- Measures how quickly inventory is sold and replenished.
- A higher stock turn indicates efficient inventory management.
Gross Margin Return on Inventory (GMROI)
- Assesses profitability of inventory investment.
- Calculated by dividing the gross margin by the average cost of inventory.
- A higher GMROI means a higher gross margin for every dollar invested in inventory.
Average Selling Price (ASP) Against the Plan
- Focuses on understanding actual sales price compared to targeted price
- Analyzes whether the average selling price is meeting planned targets for different product categories (e.g., watches versus garments).
- Factors that drive down ASP include less popular products, declining novelty of goods, and overstocking.
- Several factors can influence ASP falling below plan:
- Selling products before the end of their lifecycle.
- Introducing more low-priced items than initially planned.
- Aggressive price promotions or poorly managed discounts.
Monthly Markdowns & Accumulative Markdowns
- Planned markdowns are implemented on a schedule, across different departments or stores.
- Excessive markdowns can lead to profit losses.
- Negotiations with vendors can help minimize markdowns.
Stock Obsolescence
- Represents obsolescence reserves based on historical markdown data.
- Enables proactive management of inventory that is likely to become obsolete.
- E.g. Planning for markdowns on seasonal items or clearance sales.
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Description
This quiz explores the critical aspects of sales performance against budget targets, inventory management efficiency, and profitability assessment through GMROI. Additionally, it delves into forecasting strategies influenced by market trends and external variables. Test your understanding of these vital retail concepts.
