# Retailing Management Study Set 4

## Quiz 6 :Financial Strategy

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Neiman Marcus (a chain of high-service department stores) and Wal-Mart target different customer segments. Which retailer would you expect to have a higher gross margin Higher expense to sales ratio Higher inventory turnover Higher asset turnover Higher net profit margin percentage Why
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Gross margin gives a retailer a measure of how much profit it is making on merchandise sales without considering the expenses associated with operating the store and covering corporate overhead. Neiman Marcus should have a significantly higher gross margin than Wal-Mart. Because Neiman Marcus is a high-end department store, providing a high-end image through upscale merchandise and services to customers, operating expenses are significantly higher than Wal-Mart which is renowned for its low cost, highly efficient operation. Neiman Marcus relies on its higher gross margin to cover its significantly higher expenses.
Like the gross margin, operating expenses can be expressed as a percentage of net sales to facilitate comparisons. Again, Neiman Marcus may be expected to show a significantly higher percentage here than Wal-Mart due to its higher selling and operating expenses. Wal-Mart has built its global reputation on keeping expenses throughout its organization under tight control.
Due to the fact that Wal-Mart deals with low margins, it is imperative to have  high inventory turnover and high asset turnover to yield a profit.  These figures should be much higher than those of Neiman Marcus.
On the other hand, Neiman Marcus will have a much higher net profit margin percentage because they sell high ticket, high markup items such as brand name clothing and furnishings.  Since department stores don't typically have high turnover, they rely on margin to succeed.  Conversely, Wal-Mart focuses on high turnover to succeed.

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Examine Walgreens, CVS Caremark and Rite Aid's 2009 financial performance in the table below. Evaluate Walgreens' performance against direct external competition using the financial data and ratios. Is Walgreens' performance the same as, better than, or worse than that CVS and Rite Aid Why is this the case If your university library has access tohoovers.com(or a similar database) look up these financial ratios for the current year. Has the financial performance improved or worsened for these three retailers Reference Table:
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Financial ratios refer to those ratios which are used to determine the overall financial condition of an organization. Financial ratios help the analysts to determine the financial strengths and weaknesses of an organization. Financial ratios include ratios such as debt-to-equity ratio, current ratio, quick ratio, etc.

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Using the following information taken from the 2010 balance sheet and income statement for Urban Outfitters, develop a strategic profit model. (Figures are in millions of dollars.) You can access an Excel spreadsheet for SPM calculations on the student side of the book's Web site. Net sales $1,937.8 Cost of goods sold$1,151.7 Operating expenses $447.2 Inventory$ 186.1 Accounts receivable $78.0 Other current assets$ 422.7 Fixed assets $540.0 Free Essay Answer: Answer: Strategic profit model refers to a tool which allows a retailer to assess its firm's profitability. It allows the organization to identify the factors affecting its financial performance. The performance in the strategic profit model is measured by return on assets as it allows the organization to measure profits relative to the assets possessed by that organization. Following is the strategic profit model for company OU: The return on assets for company OU is 27.63%. Tags Choose question tag Buyers' performance is often measured by the gross margin percentage. Why is this measure more appropriate than net profit percentage Essay Answer: Tags Choose question tag Using the following information about Lowe's 2010 income statement and balance sheet, taken from Hoovers, determine its asset turnover, net profit margin percentage, and ROA. (Figures are in millions of dollars.) Net sales$47,220 Total assets $33,005 Net profit$ 1,783
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Why does a retailer need to use multiple performance measures to throughly evaluate its performance
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How does the strategic profit model assist retailers in planning and evaluating the planning and evaluating the performance of their marketing and financial strategies
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What differences would you expect to see when comparing Gifts To Go's specialty store strategic profit model with that of two dry cleaning service businesses
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