What are merchandising operations i merchandiser

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Fundamentals of Financial Management
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Chapter 16 / Exercise 8
Fundamentals of Financial Management
Brigham
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1.What Are Merchandising Operations? ii. Merchandise Inventory: merchandise that business sells to customers iii. Wholesaler : merchandiser who buys goods from manufacturers and then sells to retailers iv. Retailers : merchandiser who buys merchandise either from a manufacturer or a wholesaler and then sells those goods to consumers b. The Operating Cycle of a Merchandising Business i. Company purchases inventory from an individual or business, called a vendor 1. Vendor : individual/business from whom a company purchases goods ii. Company sells inventory to a customer iii. Company collects cash from customers iv. On income statement, merchandising company reports revenues using account called Sales Revenue v. Cost of Goods Sold (COGS) : cost of merchandise inventory that business has sold to customers 1. Used in determining gross profit before calculating net income vi. Gross Profit : excess of Net Sales Revenue over Cost of Goods Sold 1. it is extra amount company receives from customer over what company paid to vendor vii. after calculating gross profit, operating expenses are then deducted to determine net income viii. Operating Expenses : expenses, other than Cost of Goods Sold, that are incurred in the entity’s major ongoing operations ix. On balance sheet, merchandiser includes Merchandise Inventory in current assets section representing value of inventory that business has on hand to sell to customers 1. Usually listed below Accounts Receivable and before prepaid assets because current assets must be listed in order of liquidity c. Merchandise Inventory Systems: Perpetual and Periodic Inventory Systems i. Periodic Inventory System : inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand 1. Used for inexpensive goods such as in small stores ii. Perpetual Inventory System : inventory system that keeps a running computerized record of merchandise inventory 1. Achieves better control of inventory 2. Records units purchased and cost amounts, units sold and sales and cost amounts, and quantity of merchandise inventory on hand and its cost 3. Perpetual inventory system, merchandise inventory and purchasing systems are integrated with Accounts Receivable and Sales Revenue 4. Cash register at store with perpetual inventory system is computer terminal that records sales and updates inventory records
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Fundamentals of Financial Management
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Chapter 16 / Exercise 8
Fundamentals of Financial Management
Brigham
Expert Verified

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