Post on 15-Nov-2014
description
transcript
Chapter 1212Operations Management: Financial Dimensions
RETAIL MANAGEMENT:
A STRATEGICAPPROACH,
9th Edition
BERMANBERMAN EVANS EVANS
12-2
Chapter Objectives
To define operations managementTo discuss profit planningTo describe asset management,
including the strategic profit model, other key business ratios, and financial trends in retailing
To look at retail budgetingTo examine resource allocation
12-3
Profit Planning
Profit-and-loss (income) statement – Summary of a retailer’s revenues
and expenses over a given period of time
– Review of overall and specific revenues and costs for similar periods and profitability
12-4
Major Components of a Profit-and-Loss Statement
• Net Sales• Cost of Goods Sold• Gross Profit
(Margin)• Operating Expenses• Taxes• Net Profit After
Taxes
Net Sales $330,000
CGS $180,000
Gross Profit $150,000
Operating Expenses $ 95,250
Other Costs $ 20,000
Total Costs $115,250
Net Profit before Taxes
$ 34,750
Taxes $ 15,500
Net Profit after Taxes
$ 19,250
12-5
Asset Management
The Balance Sheet– Assets– Liabilities– Net Worth– Net Profit Margin– Asset Turnover– Return on Assets– Financial Leverage
12-6
Figure 12.1 The Strategic Profit Model
12-7
Other Key Business Ratios
Quick RatioCurrent RatioCollection PeriodAccounts Payable to Net SalesOverall Gross Profit
12-8
Financial Trends in Retailing
Slow growth in U.S. economyFunding sourcesMergers, consolidations, spinoffsBankruptcies and liquidationsQuestionable accounting and financial
reporting practices
12-9
Funding Sources
Mortgage refinance (due to low interest rates)
REIT (retail-estate investment trust) to fund construction– Company dedicated to owning and
operating income-producing real estateInitial public offering (IPO)
12-10
Figure 12.2 Rebuilding Kmart
12-11
Budgeting
Budgeting outlines a retailer’s planned expenditures for a given time based on expected performance
Costs are linked to satisfying target market, employee, and management goals
12-12
Figure 12.3 The Retail Budgeting Process
12-13
Budget Benefits Expenditures are related to expected performance Costs can be adjusted as goals are revised Resources are allocated to the right areas Spending is coordinated Planning is structured and integrated Cost standards are set Expenditures are monitored during a budget cycle Planned budgets versus actual budgets can be
compared Costs/performance can be compared with industry
averages
12-14
Preliminary Budgeting Decisions
1) Specify budgeting authority
2) Define time frame
3) Determine budgeting frequency
4) Establish cost categories
5) Set level of detail
6) Prescribe budget flexibility
12-15
Cost Categories
Capital expendituresFixed costsDirect costsNatural account expenses
12-16
Ongoing Budgeting Process
Set goalsSpecify performance standardsPlan expenditures in terms of performance
goalsMake actual expendituresMonitor resultsAdjust budget
12-17
Resource Allocation
• Capital Expenditures– Long-term
investments in fixed assets
• Operating Expenditures– Short-term selling
and administrative costs in running a business
12-18
Enhancing Productivity
A firm can improve employee performance, sales per foot of space, and other factors by upgrading training programs, increasing advertising, etc.
It can reduce costs by automating, having suppliers do certain tasks, etc.
12-19