Math for Business

Basics Whole Numbers (no decimals or fractions) Fractions (numerator – denominator) Decimal Numbers Add, Subtract, Multiply, Divide Organization for your safety Know the basics to accomplish great things

Reading Charts and Graphs Bar Graph Line Graphs Circle Graphs Use to graphically make a point

Bar Graph A bar graph is used to show relationships between groups. The two items being compared do not need to affect each other. It is a fast way to show differences.

Line Graph A line graph is used to show continuing data; how one thing is affected by another. It's clear to see how things are going by the rises and falls a line graph shows. This kind of graph is needed to show the effect of an independent variable on a dependent variable.

Circle (pie) Graph A circle graph is used to show how a part of something relates to the whole. This kind of graph is needed to show percentages effectively.

Math for Retail Need to figure Cash Sales Figure Sales Check Returns and Refunds Tax Discounts

Invoices Creation & Receiving Shipping

Return On Investment (ROI) Assume your company sells shoes for $80 each. Your costs to make and market the shoes is $65 per pair. Remember, profit is money earned by a business minus costs and expenses. This is how you would calculate ROI. $80-$65 divided by $65 which equals.23. Which means you get 23% return for making this shoe. HINT: Selling Price (SP) – Cost / Cost = ROI

Break-even Point This is the point at which sales revenue equals the costs and expenses of making and distibuting the product. Lets say we make toys and plan to make 100,000 cars that will be sold at $6 each. The cost to make and market the cars is $4.50 each at 100,000. To calculate break even: $450,000 divided by $6.00 = 75,000 This means we need to sell 75,000 to break even and those sold after this will be profit.

Pricing Math Profit vs. Markup Formula Cost (C) + Markup (MU)= Retail Price (RP) (RP) – (MU) = (C) (RP) – (C) = (MU)

Basic Mark-up Basic markup is Cost + MU = Retail price Percentage Mark-up - set a % for markup and figure.

Methods of Markup Dollar MU & Percentage MU Determine Dollar MU on Retail RP – C = MU($) price over cost MU($) divided by RP = MU(%) on retail

Sample problem Assume you were calculating the percentage markup on a pair of jeans that Marshal Fields stocks for $49.50 (cost) and sells for $82.50 (retail) 1. Determine $ amount RP – C = MU($) 2. Change $ markup to the percentage markup, divide it by the retail price. MU($) divided by RP = MU(%) on retail price.

Cost Method of Pricing C x MU(%) = MU($) C + MU($) = RP

Cost Method of Pricing Example We buy a T-shirt for $8.50 and sells for a cost plus a 40% markup on cost. To get retail price follow these steps 1. C x MU(%)= MU($) $8.50 x.40 = $ Add markup to cost $ $3.40 = $11.90

Example of Retail Method What is the markup and retail price of a sun visor that costs $6.75. Customary markup on retail is 40%. Follow these steps 1. Determine percentage of the retail price is equal to cost. 100%-40%=60% 2. To determine the retail price, divide the cost by the percent found. $6.75 divided by.60 = $ Calculate the dollar markup. $11.25 – 6.75 = $4.50 (which is the dollar amount for markup)

Relationship of Pricing Retail Method of Pricing RP(%) – MU(%) = C(%)

Discount Terms Cash Discounts – offered to people for paying their bills early (terms 2/10 net 30) 2/10 net 30 means that if they pay their bill in 10 days they get a 2% discount. If they wait, they pay full price and have 30 days to pay it. Trade Discounts – Is a supply chain discount Quantity Discounts – given for buying bulk Promotional Discounts – reduction for a specific goal Seasonal Discounts – usually for buying in advance or clearance

Merchandise Plan Calculations Planned Sales Beginning-of-the-month Stock Planned Reductions Planned Purchases Purchase Plan Model Stock Calculations

Financing Asset / Liability Financial Statements Balance Sheet Income Statement Cash Flow Statement Budget for Start-up

Finance Numbers Calculating Net Sales Determining Gross Profit Projecting Business Expenses Calculating Payroll costs Net Income from Operations Net Profit