Aim: What Is A Merchandising Company? Do Now: List five stores in the mall

Merchandising Company- business that sells goods (rather than services) to earn income Ex. Abercrombie & Fitch, The Apple Store, Stop & Shop  Buy goods from manufacturer (maker) already made Inventory – goods available for sale to customers Ex: Shirts, Ipods, Cereal

Operating Cycle – series of transactions: 1.Purchase inventory 2.Sell Inventory for cash or credit 3.Collect Account Receivable  Measures # of days this takes

Operating Cycle of Merchandising Company Example: Computer Barn CASH INVENTORY (Ready to sell) INVENTORY (Ready to sell) A/R

Activity………

Aim: What Is Cost of Goods Sold? Do Now: What is the primary difference between a Merchandising company and a service company?

What Is A New Expense? Cost of goods sold – the cost (price) of buying the inventory that is sold to customers All merchandising companies have this expense

Sales – price of goods sold Ex: sold 10 computers for $100 each Sales = $1,000 Cost of Goods Sold – cost (expense) of buying goods sold to customers  Ex: computers cost $50 each  CGS = $500

Gross Profit (margin) – Sales – Cost of Goods Sold Ex: Sales $1,000 – CGS $500 Gross Profit = $500 Operating Expenses – expenses (other than cost of goods sold) needed to run a business  Ex: salaries, supplies, utilities, etc. expenses  Example = $100

Net Income: Sales -Cost of Goods Sold = Gross Profit (Margin) -Operating Expenses = Net Income