Finance for Non Finance

By the end of this module, you would be able to understand Key Financial Indicators Role of Store Manager and Improvement measures Margins – IM and GM Analysis of Profit & Loss statement Learning Objectives

Lets Introduce Ourselves

Finance Function CFO Controlling Team Accounts, Payables, Receivables GL Accounting Direct/Indirect Taxes Internal Assurance Corporate Planning & Reporting Business Finance Merchant Finance Operations finance RE Finance Logistics Finance COOPs Financial Services LegalCommercialTreasury

Financial Indicators Sales Margin Profitability Inventory

Sales ABV & NOB Comp growth Division wise Sales Sales Density Sales / FTE Financial Indicators Margin GMROF GMROL Cost dump Retail Dump WAC Inventory Days on Hand In Stock trends Inventory Growth Profitability Profitable Sales Product Mix - Margin Control of Expenses Financial Indicators

Sales KPI’s KPIDefinitionFormula Desire Sales/Day Average sales made by a store on a daily basis Total Sales/No. of days store operated NOBNumbers of Bills generated ABVAverage bill value Total sales divided by total No. of Bills for that store Comp Growth Increase in Sales from corresponding period in last year Current Period / Previous Period - 1 Sale/FTE Average sales generated by FTE of the store Total Sales/Total FTE Sales Density (SPSF) Average sales generated per sq ft of area of the store Total Sales/ Net Selling Area Financial Indicators Sales

Examples Sales KPI Facts of Example Average Sales Per Day A:100,000 NOB’s per Day B: 500 Sale Corresponding Day previous year C: 80,000 FTED: 10 Net Selling AreaE: 2,500 Gross Margin %F: 15% Margin KPI ABV = A/B = 1,00,000/500 = 200 Comp = A/C-1 = 1,00,000/80,000-1 = 25% Sale/FTE = A/D*Days = 1,00,000/10 *30 days = 3,00,000 SPSF = A/E = 1,00,000/2,500 = 40 GMROL = A/D*Days*F = 1,00,000/10 *30 days*15% = 45,000 GMROF = A/E*Days*F = 1,00,000/2,500 *30 days*15% = 180 Exercise

Margin KPI’s KPIDefinitionFormula Desire Initial Margin Difference between the cost and retail value of shipments (Ship Retail – Ship Cost ) /Ship Retail DumpThrowaway ShrinkUn-Traceable Inventory Gross Margin Margin earned after MD, Dump and Shrink IM-MD-Dump-Shrink GMROF Gross Margin generated per sq ft of area of the store Gross Margin /Net Selling Area GMROL Gross Margin generated per FTE of the store Gross Margin / FTE Financial Indicators Margin Detailed understan ding of Margin will follow

Profitability KPI’s KPIDefinitionFormula Desire Controllab le Opex. Expenses incurred for Stores operation Salary + Outside Services + Merchant Fees + Utility + Store Supply + Other Expenses Non Controllab le Opex. Depreciation and Rentals, Logistics Cost totally controlled by Home Office EBITDA Profit which Store is able to generate for its own operations Gross Margin + Other Income – Controllable Expenses – Rent – Advert. – Total Logistics Cost EBIT Profit generated by stores after netting off all cost EBIDTA – Depreciation – Rent Equalisation Financial Indicators Profitability

Inventory KPI’s KPIDefinitionFormula Desire DOH No of days of Inventory at stores which is available for sale at a given point of time. Avg Inventory / COGS per day In - Stock In stock means all the merchandise is available in the store for the customer purchase. Average no. of Sku’s available / Total Sku’s Inventory Growth Growth of inventory from comparable period Current Period Inventory/ Last year Same Period Inventory– 1 Inventory Turns No. of times inventory was sold during the year 365 / DOH Financial Indicators Inventory Example DOH Average Sales Per Day : 100,000 Average Inventory : 21,00,000 DOH = 21,00,000 / 1,00,000 = 21 days Inventory turns = 365/DOH = 365/21 = times Exercise

Continuous monitoring and review to ensure Sales Growth Increasing margin Controlled expenses Balanced Inventory Profitability Role of Store Manager

Example 100 Rs.20/-. Sell Price: Rs.100/- Rakhi Day : 15 th August by 12 th, Store sold 60 Markdown of Rs.40/- sent on 13 th. Selling Price now – Rs.60/- Store sold another 20 Rs.60/- on 16 th, Counted 10 rakhis and dumped Rakhis shrink : 10. Margins – Initial Margin, Markdown and Dump, Shrink Exercise

Margins – Initial Margin, Markdown and Dump, Shrink (contd)

Questions for House 1) Can GM be higher than IM 2) Store sold 40% GM mix in Aug compared to 20% in July. The Margin in Aug is higher than July. Yes or No. 3) Store sold 40% GM mix in Aug compared to 20% in July. The Rent in Aug will be higher than July. Yes or No. 4) MM = GM + Shrink. Yes or No. 5) Dump is recorded in system at cost price. Yes or No.

The Profit & Loss statement

Profit & Loss – Controllable Expenses

Non Controllable Expenses

Questions for House 1) Difference between CFO & SI 2) 4) What are components of “Other Income” 5) What are components of “Maintenance & Repairs”

Questions

Thank You