Explain Why Financial Decisions Are So Important To Retailers

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1. Why financial decisions are so important to retailers? Financial decisions are an integral component in every aspect of a retailer’s strategy. We will explain some of the basic elements of retailing financial principles that are use throughout the retailing organization. There are three areas or paths that retailers use to measure and achieve a high level of performance such as turnover, profit and the financial leverage paths. Different retailers pursue different strategies resulting in different types of financial performances are use to examine their financial performances within the framework of these three paths into the strategic profit model. 11.2. What is income statement? The income statement is a firm’s financial performance over…show more content…
Liabilities are referring to an enterprise’s obligations such as past accounts or note payables to pay cash or other economic resources in return for past, current or future benefits. Owner’s equity is the owner capital invested in the business. Current assets are those that can convert into cash within a year. Current assets = Account receivable + Inventory + Cash + Other current assets Account receivable is referring to monies due to the retailer from selling merchandise on credit. The retailer’s ability to provide credit sales to customers could make the difference between making or losing a sale. However, the accounts receivable will tie up until collection is made if the merchandise is sold on credit. In order to ease the financial burden of carrying accounts receivable, the retailers can have the following options: To use the third party credit cards like VISA or Master Card. Not to encourage to do credit sales To offer discount to customers who pay with cash. Exhibit 11.3 Balance Sheets comparison between Departmental store ‘’A’’ and Supermarket ‘’B’’ Departmental store

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