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Business Finance Final Exam Study Cards
Terms in this set (60)
What is Pricing?
The amount of money a business charges for items it offers for sale.
is the total revenue of a business less all expenses over a specific period of time.
What is the equation to determine a selling price?
Cost + Profit = Price
is the difference between the retail price of an item and the cost of the item to the store
Margin may also be referred to as?
What is the formula for determining Margin?
Price - Cost = Margin
Supply and Demand
describes the amount of product available to sell and the willingness of customers to buy that product.
is an important indication of how well the store is doing compared to its competitors.
Sometimes merchandise does not sell according to projections. When this happens, storeowners will reduce the price of the merchandise, employing what is known as a
What is the formula used to compute the markup of an item from a percentage of cost?
Markup Amount = Cost x Markup Percentage
What is the formula used to compute the price of an item based on its markup?
Price = Cost + Markup Amount
To compute the markdown of you use what formula?
Markdown Amount = Price X Markdown Percentage
To compute the price of an item based on its markdown what formula do you use?
Markdown Price = Current Price - Markdown Amount
Sherman Antitrust Act
was passed in 1890. This law, which makes monopolies illegal, also covers price fixing, an illegal act committed by competitors who get together to set the price of certain merchandise.
The Clayton Antitrust Act of 1914 and the Robinson-Patman Act of 1936
outlawed the practice of price discrimination. Price discrimination is the act of charging different prices to different customers for the same merchandise.
The Consumer Goods Pricing Act of 1975
implemented the practice of manufacturer suggested retail prices. In some cases a manufacturer sets a recommended retail price for the items it produces. The manufacturer will suggest that retailers use this price in their stores. This legislation prevents manufacturers from requiring a set retail price and thus being able to punish storeowners who do not follow the manufacturer's pricing.
is the person who is responsible for purchasing the merchandise for a store.
The Buyers job includes the tasks of:
The amount of money available to a buyer for purchasing items for a store is called
What formula do you use when calculating open-to-buy
Open-to-Buy = planned Purchases - (Orders Received + Merchandise Ordered)
is a business from which a buyer purchases merchandise
is the total amount of goods a business has.
is the vendor's bill for stock purchased. It lists the items and quantities being delivered.
There are two systems that stores use to do this
The physical inventory system
The perpetual inventory system
measures how often stock is sold during a given time period
What formula do you use to compute stock turnover in items of stick
(Stock Turnover in Items) = (#of Items Sold) /(Avg. # of Stock Items in Inventory)
What formula do you use to compute stock turnover in items invested
(Stock Turnover in $) =($ Sales of Inventory Items) / (Avg. $ Value of Inventory Investment)
Equal Opportunity Employment Law says what
It protects employees from be discriminated on by age, race, generder, etc.
Employee Complesation Law says what
Determines minimum wage, 40 hour work week, overtime pay, child labor protection law
Employee Safety and Health
Designed to be sure employees have a safe place to work and that working conditions will not have a negative imipact on their health
Promotion is the positive communication a business has with its customers.
Four Types of Promotion
Paid sales associates to interact with the store's customers.
Activities that encourage customers to make purchases:
Communication to customers paid for by a business
Unpaid references to a business to further a positive impression.
Formula used to determine promotional budget
Net Sales = Total Sales - (Returns + Discounts)
Advertising Laws are enacted and enforced by the federal government's
Federal Trade Commission (FTC).
Advertising- when a business knowingly makes claims about a product that are not supported by facts. In this case the FTC has the legal authority to issue a cease and desist order.
Bait and Switch
advertising a product at a lower price and then stocking little to none of the product with the intention to sell the customer a more expensive item.
Cease and Desist
order legally forces a business to discontinue advertising that makes untrue claims.
are the cost associated with opening and operating a new business for a period of time, usually one year.
There are several methods for financing a new business. Some financing methods include:
Your own money
Loans from family or friends
A loan from a bank or other lending agency, and
Money from a venture capitalist company
A personal financial report
Your personal financial report lists and compares your total assets and liabilities.
any tangible item of value you own, such as a savings account or land.
any debt you have, such as a car loan or money owed on credit cards.
difference between total assets and total liabilities.
NetWorth = Assets - Liabilities
a report that outlines projected business revenue and projected business expenses for a period of time. That period of time can vary and might be a month, 3 months (quarterly), 12 months (yearly).
report that summarizes the business's assets and liabilities, and the owner's equity. The purpose of a balance sheet is to show a clear picture of the business's assets and liabilities at a particular point in time.
Cash Flow Statement
a report that provides information about when cash comes into the business and when that cash will be spent. The purpose of the cash flow statement is to let the business owner know if there will be enough cash to cover the business's projected expenses.
The amount of the loan
is the amount of money you pay to the lender for use of the money you borrow
What formula is used for Computing Simple Interest
Simple Interest = Principal x Annual Interest Rate x Length of Time of Loan
The process gathering, recording, analyzing, and reporting informatoin regarding customers or potential customers.
The amount of money left to spend after necessities are paid for?
The term used to describe basic characteristics that dientify and distinguish the peole in a target market.
There are three charactertistics described in a target market what are they?
demographics, geographics, and psychographics
The process used to classify a broad market into smaller groups.
The specific group of people a retailer wants as customers.
the term used to describe the analysis of customers lifestyles and how they spend their time and money. LIfestyle analysis gathers informatoin about customers activities, attitudes, and options.
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