ABSTRACT

Retailing firms focus on selling goods and services to consumers through their stores and increasingly through the Internet. Retailers can be divided into two categories: food and general merchandise. This chapter reviews the basics of financial statements and focuses on using the information contained in them to understand important concepts that drive decision making in retail businesses. It also reviews three financial statements: balance sheet, income statement, and cash flow statement. Information from financial statements can be used to quickly compute various metrics to gain insights into the performance of a company and to compare companies. The original DuPont model combines key information from the balance sheet and income statement to provide additional insight into a company's performance. Specifically, this model quantifies operating efficiency using net profit margin, and asset efficiency by asset turnover. Brick-and-mortar retail stores have several checkout counters, and one of the operational decisions store managers need to make is staffing these counters at any given time.