Overview of Financial Statements

Read each section in this chapter, which explains the purpose of the balance sheet, income statement, and the cash flow statement. It also is a guide to where you will find financials on publicly traded companies. You should get as much practice working on these statements as you can, since they are the fundamental information on any organization. Make the connections between each financial statement. The more you understand the connectivity of these statements, the better understanding you will have of how the entire accounting system works, which is important if you want to understand the overall operations of any company.

Special Considerations for Merchandising Companies

Overview of Merchandising Operations

Merchandising is any practice which contributes to the sale of products to a retail consumer.


Learning Objective

  • Recognize what items make the financial statements for a merchandiser different from a manufacterer


Key Points

  • In Retail commerce, visual display merchandising means maximizing merchandise sales using product design, selection, packaging, pricing, and display that stimulates consumers to spend more.
  • In the supply chain, merchandising is the practice of making products in retail outlets available to consumers, primarily by stocking shelves and displays.
  • Merchandising has its own specific income statement other than general income statements in other industries.


Term

  • supply chain
    A system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer.


In the broadest sense, merchandising is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to the variety of products available for sale and how the products are displayed to stimulate interest and entice customers to make a purchase.


Retail store

Merchandising is any practice which contributes to the sale of products to a retail consumer.


Promotional merchandising

In Retail commerce, visual display merchandising refers to the process of maximizing merchandise sales using product design, selection, packaging, pricing, and display that stimulates consumers to spend more. This includes disciplines and discounting, physical presentation of products and displays, and decisions about which products should be presented to which customers at what time.This annual cycle of merchandising differs between countries and some times within them. The cycles may relate to cultural customs like holidays, and seasonal issues like climate and local sporting and recreation. In the United States for example, the basic retail cycle begins in early January - with merchandise for Valentine's Day - and ends around mid-February. Presidents' Day sales are held shortly thereafter.


Retail supply chain

In the supply chain, merchandising is the practice of making products in retail outlets available to consumers, primarily by stocking shelves and displays. While this used to be done exclusively by the stores' employees, many retailers have made substantial savings by requiring it to be done by the manufacturer, vendor, or wholesaler that provides the products to the retail store. In the United Kingdom, for example, there are a number of organizations that supply merchandising services to support retail outlets with general stock replenishment and merchandising support for new stores. Through this approach, retail stores have been able to substantially reduce the number of employees needed to run the store.


Specific income statement of merchandising operations:


Sales

- Sales Return & Allowances

- Sales Distcount

= Net sales

- Cost of goods sold

= Gross margin

- Operating expenses

= Income before taxes

- tax

= Net income