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Word	Description
ABC Inventory	A methodology that classifies inventory based on importance or display priority. In general retail, “A” items command the most attention with “C” items receiving the least. In home furnishings companies with varying showroom sizes, “A” items are displayed in all locations and advertised consistently, “B” items shown only in the mid-sized stores, and “C” items only in the largest showrooms.
Accounts Receivable	An Asset reflecting money due to the company from customers as a result of Delivered Sales.
Accrual Accounting Method	An accounting method that is used to measure operational efficiency and profitability versus the Cash Method which measures how much you’re spending to meet business needs. In Accrual accounting, income and expenses are reported on the Income Statement as they are earned or invoiced, although they have probably not been collected or paid as yet.
Acid Test Ratio	Similar to Current Ratio but considered a more reliable measurement of Liquidity as it deducts inventory, which is much slower to liquidate. Also called Quick Ratio. Formula: Acid Test Ratio = (Current Assets - Inventory) ÷ Current Liabilities
Advertising Co-op	Funds offered by or negotiated from a supplier for use toward promoting their products. These are typically computed as a percentage of purchases but can also be a fixed amount. Co-op funds generally have expiration dates along with other specified conditions. Advertising Co-op is often reimbursed, upon submission of the advertisement, on a 50/50 basis, half paid by the retailer and half by the supplier from the pool of funds accumulated.
Amortization Expense	This is the allocation to expenses of the cost of an intangible asset, such as a patent or copyright. See Depreciation Expense
Annualized	The process of converting a number to an annual value, if less than a year’s data is available for a specific calculation. It is generally done to correctly compare ratios which are usually based on annual performance, such as Inventory Turn Rate and Gross Margin Return On Inventory (GMROI). For instance, to determine the annual GMROI of a product, vendor or entire store when only 2 months of Gross Profit is known, multiply the known Gross Profit by 6 (12 months ÷ # months reported) to Annualize the number before dividing by the Average Inventory. (see GMROI) Known Value ÷ (# months represented ÷ 12).
Approval Rate	Measures the efficiency of the credit process for in-house credit and for outside finance companies. Indicates to the retailer the aggressiveness of the finance company with whom they are dealing and the amount of sales lost due to credit turn downs. Formula: Approval Rate = Total applications approved / applications submitted
Asset	A resource that is expected to benefit the company financially, generally something owned by or owed to the business. (see Liability)
Asset Turnover	A measure of the efficiency of assets with regard to generating revenue. The higher the ratio, the better Assets are being utilized to generate Delivered Sales. Formula: Asset Turnover = Delivered Sales ÷ Total Assets
Average Cost	Average Cost is the current or running average of all costs of a particular item. There are several methods of computing Average Cost and these are limited by the method that costs are stored in the system. Generally, the more accurate method is to average the current FIFO costs to compute this average. Another common method is to maintain a running or Weighted Average Cost which is used when there is no method of storing individual FIFO costs. In this method the new costs and quantities are computed against the single stored average cost to compute a new average cost. Due to several factors this cost can progressively become less accurate until quantities drop to zero and the calculation starts over. Each software system has its own method of computing Average Cost and it is important to fully understand your system’s method in order to weigh the validity of calculations.
Average Inventory	The divisor used to compute Inventory Turn Rate and GMROI, so it is an extremely important figure. It represents the average amount of inventory for a product, category, vendor, entire company, etc., for the specified time period and is usually stored at the item level to facilitate multiple viewing perspectives. The ideal method is to take a daily sampling and maintain an Average Inventory based on this sample. If this is not possible then using the current or average of month-end inventory levels is often used for calculations. If inventory levels are historically steady then this works satisfactorily. However, if the inventory levels fluctuate dramatically, such as with seasonal purchasing or special ordering, then the resulting ratios can be misleading, rising or falling from day to day.
Average Maturity	Average term in months of the accounts receivable portfolio based on the collection rate. Formula: Average Maturity = 100 / collection rate
Average Sale	The average dollar amount sold to individual customers per visit over a specified period of time, used as a measurement of sales effectiveness. This is generally measured by company, store and salesperson and is compared to a store or company average for determining who is in need of development. Also called Average Ticket. Formula: Average Sale= Total Written Sales ÷ Number of Sales Note: Number of Sales is the number of customers that comprised the written sales figure, not the number of invoices required to complete the transaction. For instance, if the customer purchased a chair for immediate take with, a bedroom suite for delivery next week and a special order sofa, then this may result in 3 invoices. To calculate Average Ticket all three invoices are treated as one sale.
Averave Ticket	See Average Sale
Balance Sheet	This is a financial statement that reports a company's assets and liabilities as of a specified date along with the company’s Stockholder’s Equity (Net Worth). Assets = Liabilities + Stockholder’s Equity (Net Worth)
Barcoding	A barcode is a font, or symbolic representation, of the numeric or alpha product code of a product which enables an electronic scanner to interpret the number without manual input, which significantly reduces errors and speeds up input. This improves the process of receiving, verifying, picking, transferring and selling goods. There are several barcode standards with the most popular in retail being UPC (internationally registered and numeric only). There are various types of UPC codes as well as Code 128 (numeric only) and Code 39 (or “3 of 9”), which has been adopted by the NHFA as an industry standard due to its ability to recognize alpha and numeric characters of any length. Unfortunately, the home furnishings industry has not yet accepted any standard therefore requiring retailers to retag merchandise at receiving before put away.
Book Inventory	The value of Inventory as shown on the Balance Sheet. This figure often includes inbound Freight costs if freight is considered an asset instead of an expense (see Freight). Depending upon the system being used, this figure is derived from the posting of received goods or the posting of payables invoices. Typically, book inventory will differ from physical inventory due to Shrinkage. Formula: Book Inventory = Opening Inventory + Purchases – Cost of Goods Sold - Adjustments
Break-Even Sales	The amount of delivered sales or revenue required to cover expenses or to “break even”. The accuracy of this calculation is dependent upon the ability to isolate fixed and variable expenses from each other. Formula: Break Even Sales = Net Sales * Fixed Expenses ÷ Contribution Margin
Cash Flow Forecast	A financial statement that forecasts cash requirements in the future. This report looks at anticipated collections, accounts payable and future purchases to compute cash requirements or shortfalls.
Cash Flow Statement	A financial statement showing the flow of cash in and out of the business, including sources and recipients over a specified time period.
Cash Method	Accounting method in which income and expenses are accounted for as they are paid. This is no longer a generally acceptable method for most businesses as it doesn’t give a clear picture of operating efficiency (see Accrual Method). The check register, or Cash Flow Statement, will typically fulfill owners’ needs in the area of cash management.
Cash Recovery Rate (CRR)	Measures the amount of cash collected in an Accounts Receivable portfolio over a period of time as a percentage of the total liquidation including the non-cash items (interest rebates, charge-off, etc). Predictor of the amount of cash the retailer will actually collect on the portfolio over its term and used by lenders in setting the advance rate on the portfolio. Formula: Cash Recovery Rate = Total cash collections (payments, bad debt recoveries, cash pay-outs) / total liquidation (payments, cash pay outs, charge-off, early pay-out rebates)
Charge-Back	Amount charged back to the vendor for repair fees incurred while servicing products under warranty. Charge Backs are either deducted as an accounts payable credit or applied as an accounts receivable debit to be paid by factory check. Also called Vendor Charge Back.
Charge-Off Rate	The total amount of the accounts receivable that have been charged-off measured as a percentage of the total net receivables. Again used to measure effectiveness of the credit policy and collection efforts. Can be measured for any period, including week, month, quarter or year. See Net Charge-Off Rate. Formula: Charge-off Rate = Total dollars charged off in the reporting period / total net receivables Formula: Annualized Charge-off Rate = (Charge-off Rate / number of months in the period) x 12
Chart of Accounts	A listing of all general ledger accounts indicating the account number, description and type (Asset, Liability, Income, Expense, Capital).
Close Ratio	The ratio of sales made to the number of customers greeted (UPs) over a specified period of time, used as a measurement of sales effectiveness. This is typically measured by company, store and salesperson to arrive at a store or company average for determining who is in need of development. Formula: Closing Ratio = Total Number of Sales ÷ Total UPs
Co-Op	Funds offered by or negotiated from a supplier for use toward promoting their products. These are typically computed as a percentage of purchases but can also be a fixed amount. Co-op funds generally have expiration dates along with other specified conditions. Advertising Co-op is often reimbursed, upon submission of the advertisement, on a 50/50 basis, half paid by the retailer and half by the supplier from the pool of funds accumulated.
Collection Rate	Measures the collection effectiveness and original maturities of an Accounts Receivable portfolio by calculating the amount of payments received in a period as a percentage of the total receivables. Also a good cash flow forecaster. Formula: Collection Rate = Total amount of collections in the period (month) / the total outstanding receivables
Contra Account	An account which is treated the opposite of other accounts in the same category and used as an offset to another account. An example is Accumulated Depreciation which is the offset to Depreciation expense. Accumulated Depreciation is an Asset but is credited, instead of debited like other Assets, to increase the amount.
Contribution Margin	The remainder from sales after covering Variable Expenses and, therefore, the amount remaining to cover Fixed Expenses and generate profits. Used to calculate Break Even Sales and Net Profit Yield from sales above the break even point. Formula: Contribution Margin = Sales less Variable Expenses Formula: Contribution Margin % = Contribution Margin ÷ Sales
Cost of Goods Sold (COGs)	The amount of cost relieved from inventory to generate the Delivered Sales for a particular period. This includes inbound freight costs if these freight costs are also included in the Inventory figure instead of being expensed.
Cost Per Shopper	The investment made to attract each Shopper (Customer Asset or Up), or customer buying group, shopping the store during a specified period of time. Formula: Cost Per Shopper = Advertising Cost / # of Shoppers
Credit	A “payment” entry into an account, or the right-side column of entries into the account. The following are examples of crediting accounts: Crediting Assets and Expenses decreases the amount in the account. This includes Cash, Inventory, Advertising, Depreciation and so forth. The exception would be Contra accounts, like Accumulated Depreciation, which is debited to decrease the amount. Crediting Liabilities increases the amount in the account. This includes Customer Deposits, Accounts Payable and Notes Payable.
Credit Balance	Accounts Receivable term indicated money owed to the customer from a deposit on an undelivered sale, a cancelled sale or a returned item. Total of Credit Balances are reflected in the Liability account Customer Deposits. See also Debit Balance.
Cross-Docking	An operations efficiency routine whereby newly received products are moved directly from the receiving area to the delivery staging area, eliminating the process of putting away and picking.
Current Asset	Assets which can be turned into cash within one year.
Current Liability	Liabilities which must be satisfied within one year.
Current Ratio	A measurement of a business’s Liquidity based on the ability to generate cash and pay short-term debts. See also Acid Test (Quick) Ratio. Formula: Current Ratio = Current Assets / Current Liabilities
Customer Asset	A shopper as viewed from an advertising perspective. Derives from the view that an investment was made to bring them in so they must be an asset. Also called UP or Customer Buying Group. Customer Buying Group differs from an individual in that a couple or family is likely to make a single purchase and is, therefore, only one buying opportunity. The variance in traffic sources has always posted a challenge when counting Customer Assets. Counting “door swings” is misleading as it reflects families, delivery personnel and employees. Generally, an audit is made over time to determine how many door swings represent a single Customer Asset. This figure is then divided into the door count to get a relatively accurate value.
Customer Deposits	The amount of funds held as a deposit from written sales, treated as a Liability due to the fact that these funds are to be returned to the customer if the sale is not fulfilled.
Customer Satisfaction Index (CSI)	The percentage of customers that are satisfied with the company’s service. This can be measured for the entire company, or for a particular department such as sales or delivery. Requires extensive survey process to determine accuracy. Formula: Customer Satisfaction Index = Number of Satisfied Customers / Total Customers Responding to Survey
Cycle Inventory	Inventory method where specific products and/or locations are verified on a regular basis, completing a full inventory in a predetermined “cycle”. Done properly, this method eliminates the need for annual full physical inventories.
Days Stock On Hand	The number of days of Inventory which is on hand based upon the Inventory Turn Rate. Formula: Days Stock On Hand = 365 / Inventory Turn Rate
Debit	A “debt” entry into an account, or the left-side column of entries into the account. The following are examples of debiting accounts: Debiting Assets and Expenses increases the amount in the account. This includes Cash, Inventory, Advertising, Depreciation and so forth. The exception would be Contra accounts, like Accumulated Depreciation, which is credited to increase the amount. Debiting Liabilities decreases the amount in the account. This includes Customer Deposits, Accounts Payable and Notes Payable.
Debit Balance	Money owed by the customer from a completed sale. Total of Debit Balances are reflected in the Asset account Accounts Receivable. See also Credit Balance.
Delinquency	The dollar amount and percentage of a receivables portfolio that is in a certain delinquency range. Typically reported as 0-30 (1 payment), 31-60 (2 payments), 61-90 (3 payments) and 91+ (4 payments or more). Used to grade and manage the effectiveness of the credit policy and collection efforts. Formula: Category Delinquency Percentage = Total Balances in the delinquency category / the total Outstanding Receivables
Delivered Sales	Sales that have been completed, though not necessarily paid for, by either being picked up, delivered or shipped to the customer. Delivered Sales are used to monitor operational and financial effectiveness. In most retail environments this would simply be called a “sale”. However, due to the time lapse between the time a sale is written and completed, sales are measured based on Delivered or Written. Written Sales are more often used to monitor advertising and sales effectiveness. See Written Sales.
Delivery Sales	The portion of the Delivered Sales which were delivered to the customer versus picked up by the customer, used to determine delivery effectiveness.
Depreciation Expense	The reduction of earnings (profits) to write off the cost of a tangible Asset over its estimated useful life, such as trucks, computers and furniture.
Door Swings	A term applied to the number of times a door is opened by a Shopper. This figure is often reduced by a predetermined percentage based upon the number of times a door is opened by non-customers (employees, delivery personnel, etc.)
EBIT	Earnings Before Interest and Taxes, which measures the earning power of the operation before paying interest and taxes.
EBITDA	Earnings Before Interest, Taxes, Depreciation and Amortization, which is an approximate measure of operating cash flow based on data from the Income Statement. Formula: EBITDA = Net Profit (before taxes) + Depreciation Expense + Amortization Expense
EDI	See Electronic Data Interchange
Electronic Data Interchange (EDI)	The exchange of information computer-to-computer by means of telecommunications or the Internet. This is used to transmit and receive purchase orders, acknowledgments, invoices, shipping confirmations, payments and other transactions without the need to send or reenter the information. EDI documents are typically designed to meet international (ANSI) standards to facilitate communication between incompatible computer solutions.
Expense	Investments made, typically measured monthly, to support the generation of sales and profits. Examples of expenses are advertising, payroll, rent and other purchases.
FIFO Cost	First In First Out (FIFO) is a method of storing and relieving Cost of Goods Sold based upon applying the first (oldest) cost in the record to sales as they are posted, the remaining inventory reflecting the most recent costs. FIFO cost can either be stored by total company or by product location. In the latter case the cost moves with the product. The disadvantage is that a poor producing selling location can accumulate the older, or generally lower, costs which deflate the margins of more productive locations.
First Time Completion Rate (FTCR)	This is a measurement of the ability to complete deliveries and/or pickups on the very first attempt, thereby making it the best overall indicator of operational efficiency. Formula: # Deliveries (and/or Pickups) completed on the first attempt / # Deliveries (and/or Pickups) attempted
Fixed Asset	A product or item purchased for use by the business instead of for resale to customers.
Fixed Expense	An expense which does not change as sales increase or decrease. See Variable Expense.
Floor Sample Inventory	The amount of Inventory used in the sampling of inventory in showrooms, known as Floor Samples. Though often “nailed down” permanently, these products are considered part of Inventory instead of a Fixed Asset because they will eventually be sold. For this reason they are included in Inventory Turn Rate calculations and will determine Maximum Achievable Turn Rate.
Freight Costs	The cost of an item at the time of receiving is generally considered a Landed Cost, which is the Raw Cost plus inbound freight costs. In most companies, freight is treated as an asset and is kept in a special inventory account, which appears on the Balance Sheet. When products are sold, a proportional Cost of Freight is added to Cost of Goods Sold to arrive at a true Cost of Goods figure. In some companies, however, freight is treated as an expense and appears on the Income Statement. This can lead to a misleading operational picture if shipment amounts vary considerably from one month to another. When this occurs, proportionately higher or lower freight costs (against products received that month) will be applied to products sold that month, resulting in a significant “swing” in Gross Margin.
GMROI	Gross Margin Return on Investment/Inventory (GMROI) is the amount of Gross Profit generated from the amount of Inventory investment over an specified period (usually annual), expressed as a dollar amount (“for every dollar invested in inventory there has been a return of xx dollars in gross profit”). Also called Gross Margin Return On Investment. Formula: GMROI = Gross Margin ($) / Average (or Current) Inventory Formula: Annual GMROI = Annual(ized) Gross Margin ($) / Average (or Current) Inventory
Gross Margin	The amount of profit remaining after deducting Cost of Goods Sold from Delivered (or Written) Sales for a specified period of time and for a specified product, category, vendor or entire company. Can be expressed as a dollar amount or percentage. Also called Gross Profit. Formula: Gross Margin ($) = Sales - Cost of Goods Sold Formula: Gross Margin (%) = Gross Margin ($) / Sales Formula: Retail = Cost / Gross Margin %
Gross Margin Return on Inventory/Investment (GRMOI)	The amount of Gross Profit generated from the amount of Inventory investment over an specified period (usually annual), expressed as a dollar amount (“for every dollar invested in inventory there has been a return of xx dollars in gross profit”). Also called Gross Margin Return On Investment. Formula: GMROI = Gross Margin ($) / Average (or Current) Inventory Formula: Annual GMROI = Annual(ized) Gross Margin ($) / Average (or Current) Inventory
Gross Profit	See Gross Margin
Income Statement	A financial statement that compares sales to expenses to measure profitability. This statement is usually viewed by corporation and store (profit center) for months, quarters and years. Also call a Profit & Loss (P&L) Statement.
Incremental Sales	Amount of sales remaining after breaking even which is equal to profits. Used to determine Net Profit Yield from Break Even Sales. Formula: Incremental Sales = Actual (Delivered) Sales - Break Even Sales
Inventory Cost	The total value of undelivered product which is on hand, including sold, unsold, damaged and missing product. This figure sometimes varies between the actual Physical Inventory, the computer-known Physical (Perpetual) Inventory and the Book Inventory due to timing, accounting methods and possible computer or human error.
Inventory Equity	The percentage of the Inventory which is fully paid for based upon the relationship between number of days supply on hand (from Inventory Turn Rate) and payables terms. If there is a 45 day supply of inventory (8.0 turns) and average payables terms are Net 45 days then there is no money tied up in inventory; the rate of sale is equal to the rate of payment of invoices. If there is a 146 day supply of inventory (2.5 turns) then there would be a 69% investment in inventory based upon the same terms. Item, Vendor or Category Formula: Inventory Equity = (# Days Stock On Hand - Average Payables Terms) ÷ # Days Stock Financial Formula: Inventory Equity = Payables ÷ Inventory
Inventory Turn Rate	The amount of times Inventory will be replenished in entirety during any specified period (generally one year). This is a relative measurement based on a snapshot as most products will not be completely depleted and replenished but, rather, perpetually restocked. Formula: Inventory Turn Rate = Annual(ized) Cost of Goods Sold / Average (or Current) Inventory
Invoiced Sales	Sales that have been Delivered and have been posted to the general ledger, creating a Debit Balance if unpaid at time of invoicing.
JIT	See Just In Time
Just In Time (JIT)	An approach to merchandise replenishment which attempts to bring new product in at the same rate as it is being sold, thus having it available “just in time” for the customer’s need. When perfected there is no need for storage of product in a warehouse. See Cross-docking.
Keystone	A traditional retail term indicating the resulting retail price of a product after doubling the cost. This is equal to a 50% Gross Margin or 100% Markup. Also called a Number.
Landed Cost	The purchase cost of a product including inbound freight costs, or the amount it costs to “land” the product in the store. See Raw Cost.
Leverage	The use of borrowed assets by a business to enhance the return on the owner's equity. The expectation by the company is that the interest rate charged will be lower than the earnings made from the loan.
Liability	Money owed or potentially owed by the company, such as Customer Deposits, by the company. (see Asset)
LIFO Cost	Last In First Out (LIFO) is a method of storing and relieving Cost of Goods Sold based upon applying the latest cost in the record to sales as they are posted, the resulting inventory reflecting the older costs. LIFO can have tax advantages and is more often calculated at year end than computed real-time.
Liquidity	The ease of converting an asset to cash as measured by the Current Ratio or Acid/Quick Ratio.
Locator System	A storage accountability method of tracking inventory by assigning locations within the warehouse or store in which product is put away. This can be done either two-dimensionally by assigning aisle-and-bin location grids or three-dimensionally by adding level (or vertical location) to the grid. In this environment, products are tracked and located by a specific location within a room or building. The two key advantages of a locator system are each of counting, and retrieving products and assigning a picking map which enables pickers to move in a “serpentine” manner through the warehouse, reducing or eliminating multiple trips to the same area.
Long Term Liability	Liabilities, usually loans, which can be satisfied over a period of time greater than one year.
Mark-Up	The percentage applied to Cost to determine the retail. (See Gross Margin). For instance, if the intended retail price is double the cost then the Markup would be 100% (100% of the cost would be added to the cost). The resulting Gross Margin would be 50%. Formula: Markup % = (Retail - Cost) / Cost Formula: Retail = Cost + (Cost * Markup %)
Maximum Achievable Turn Rate (MATR)	The maximum Inventory Turn Rate that could be achieved by reducing Inventory to no more than floor samples (no backup product in the warehouse). Formula: Maximum Achievable Turn Rate = Annual(ized) Cost of Goods Sold / Floor Sample Inventory Cost
Net Charge-Off Rate	The total amount of the accounts receivable that have been charged-off, reduced by the bad debt recoveries, measured as a percentage of the total net receivables. Again used to measure effectiveness of the credit policy and collection efforts. Can be measured for any period, including week, month, quarter or year. See Charge-Off Rate. Formula: Net Charge-off Rate = (Total dollars charged off in the reporting period – bad debt recoveries) / total net receivables
Net Income	See Net Profit
Net Profit	The amount of profit remaining from Sales after deducting Cost of Goods Sold and Operating Expenses. Can be expressed as before (income) tax or after (income) tax Net Profit. Also called Return on Sales (ROS). See EBITDA and EBIT.
Net Profit Yield	The effective Net Profit after “breaking even” which is produced from the Incremental Sales. Formula: Net Profit Yield = Incremental Sales (Actual Sales - Break Even Sales) * Contribution Margin %
Net Worth	The value of the company as determined by deducting Liabilities from Assets. Also called Shareholders Equity.
Net-Net Cost	The cost of a product after deducting discounts, rebates and co-op advertising funds in order to determine the actual amount paid for a product after all negotiated benefits.
NIL	See Not In Location
Non Saleable	See Not Available for Sale Inventory
Not Available for Sale Inventory (NAS)	That portion of the Inventory which is not available to be sold due to being damaged, waiting parts, being repaired or lost.
Not In Location (NIL)	Inventory that is not located where specified in the computer, generally tracked until located or written off. Usually referred to as “NIL”.
Number	A traditional retail term indicating the resulting retail price of a product after doubling the cost. This is equal to a 50% Gross Margin or 100% Markup. Also called Keystone.
Open to Buy (OTB)	A budget which forecasts purchasing needs to ensure that desired Inventory levels are not exceeded or that needed inventory reserves are available. Open to Buy can be developed by category, vendor, store or entire company. Factors which determine budgets are sales projections at cost, current inventory levels, desired inventory levels (based on Inventory Turn Rate) and incoming purchases. Special order allotments are usually deducted from a category based on an historic trend. As special orders are buying decisions made by customers instead of buyers, removing these allotments prevents overbuying.
Performance Index	See Return on Shoppers
Perpetual Inventory	Inventory method where inventory is accounted for in a real-time basis, with receiving, movement, delivery and adjustments being updated as they occur.
Personnel Productivity Ratio (PPR)	This measures the percentage of each gross margin dollar that must pay for the personnel required to earn them. It serves as an indicator of employee efficiency. Formula: PPR = Gross Margin % / Payroll %
Physical Inventory	The total amount of Inventory on hand at a particular point in time as confirmed by inventory verification and software systems. See Book Inventory.
Profit and Loss Statement	A financial statement that compares sales to expenses to measure profitability. This statement is usually viewed by corporation and store (profit center) for months, quarters and years. Also called an Income or P&L Statement.
Quick Ratio	Similar to Current Ratio but considered a more reliable measurement of Liquidity as it deducts inventory, which is much slower to liquidate. Also called Acid Test Ratio. Formula: Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Raw Cost	The cost of an item if picked up directly at the factory and, therefore, without freight. See Landed Cost.
Replacement Cost	The amount that would be paid for an item if ordered from the factory today. This cost is rarely used to compute Cost of Goods Sold as it does not reflect the cost of the current inventory. However, it is commonly used to compute retails and commissions as it results in a consistent environment.
Return on Advertising	The amount of Written Sales resulting from Advertising Expense, expressed as a dollar amount (“for every dollar invested in advertising there has been a return of xx dollars in written sales”). Formula: Return on Advertising = Written Sales / Advertising Expense Alternate Formula: Return on Advertising = Return on Shoppers / Cost Per Shopper
Return on Assets (ROA)	An indication of overall financial performance from the viewpoint of the company assets. Often used to compare effective use of assets in the business vs. investing those same assets in another product, service or vehicle (stocks, bonds, etc.). Formula: Return on Assets = Net Profit After Tax / Assets
Return on Net Worth	An indication of overall financial performance from the viewpoint of the owner's equity. Formula: Return on Net Worth = Net Profit After Tax / Net Worth
Return on Net Worth Including Owner’s Cash Compensation	Profitability expressed as a percentage of net profit after-tax and cash taken out of the business to the owner's equity in the business. In other words, the true return, including cash, on the owner's equity in the business. Formula: Return on Net Worth = (Net Profit After Tax + Owner’s Compensation) / Net Worth
Return on Sales	See Net Profit
Return on Shoppers (ROS)	The average dollar amount purchased by every Shopper (Customer Asset or UP) which comes into the store during a specified period of time. This indicator can be calculated by sales person, store or entire company. This index is an overall measurement of sales performance. Also called Sales Productivity Index and Performance Index. Formula: Return on Shoppers = Total Written Sales / # Shoppers
Revenue	All income generated by the business, including Sales of products, Sales of services and earnings from investments. In general practice, the term is often interchangeable with Delivered Sales.
Sales Per Employee	A measurement of effective overall staffing levels. If this number is dropping then it may indicate that staffing is either rising unnecessarily or that sales no longer support existing staff levels. If this number is rising rapidly then it could indicate an understaffed situation. Formula: Sales Per Employee = Sales / Number of Employees
Sales Productivity Index	See Return on Shoppers
Shareholders Equity	The value of the company as determined by deducting Liabilities from Assets. Also called Net Worth.
Shopper	A single selling opportunity which can be an individual, a couple or a family that is likely to make a single purchase. The variance in traffic sources has always posted a challenge when counting Shoppers. Counting “door swings” is misleading as it reflects families, delivery personnel and employees. Generally, an audit is made over time to determine how many door swings represent a single Shopper. This figure is then divided into the door count to get a relatively accurate value. Also called a Customer Asset or Up.
Shrink Reserve	An accrual of anticipated Shrinkage used to forecast profits based on expected losses.
Shrinkage	Inventory losses from theft, damage, loss and accounting errors.
SPIFF	This is an acronym for “Special Promotional Incentive From Factory” and was originally cash paid to salespeople for the sale of specific items. Nowadays, retailers generally control the assignment and distribution of SPIFFs.
Store Cost	An arbitrary, or “loaded”, cost, which is assigned to a selling location. This cost is used to compute retail prices, discounts and commissions.
Total Net Receivables	The principal balances of open Accounts Receivable only, not including unearned finance charges. See Total Outstanding Receivables.
Total Outstanding Receivables	In closed-end or contract receivables, this is the value of open Accounts Receivable including the principal balances and unearned finance charges. In revolving receivables, this is the value of open Accounts Receivable including the principal balances only. See Total Net Receivables.
Traffic	The flow of Shoppers into a store, typically measured by Door Swings or UPs for a particular time period, used to determine advertising and sales effectiveness. Combined with the expected amount of time spent with each customer, this figure is also used to forecast staffing needs.
Turn Rate	See Inventory Turn Rate
Up	A “turn” at greeting a customer as viewed from a salesperson’s perspective. Derives from being “up to bat”. See Shopper.
Variable Expense	An expense that fluctuates with the amount of sales produced, typically as a predictable percentage of sales. Examples include sales commission, delivery expenses and advertising. See Fixed Expense.
Vendor Charge-Back	See Charge-Back
Volume Rebate	A rebate earned from the factory for purchasing predetermined amounts of product, typically computed on an annual basis.
Written Sales	Sales which have been written and accepted by the customer but may or may not become Delivered Sales. Used to track work-in-process, and to evaluate advertising and sales effectiveness. See Delivered Sales.

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