SBM I EXam 4

  1. ABC method
    A method of classifying inventory items with categories which are of high value, less costly, and/or low cost items.

    •      a. used for inventories containing thousands if items
    •      b. classify inventory by level of control needed

         c. "A" items require detailed control, such as high value or critical items that could shut down the company if not available (i.e. caskets)

         d. ""B" items are important but require only periodic counts (i.e vaults and embalming fluid)

         e. "C" items are those that can be controlled by visual checks (i.e. cosmetics, towels, bathroom tissue, acknowledgement cards)

         f. "A" and "B" items should be kept on inventory ledger cards and "C" items simply use a visual check
  2. Advantages of leasing over buying
    a. avoidence of obsolescence

    b. release of funds for working capital
  3. Buying
    selecting those materials needed in your business
  4. Cash discount
    discount ofered as an incentive for prompt payment
  5. Chief source of supply for manufacturers and wholesalers, which vendor?
    Merchant middlemen

  6. Commercial notes
    issued by banks and other lending institutions for short periods, generally thirty to ninety days, butgiven up to six months. These notes are usually repaid in one lump sum on the maturity date. Often there is no collateral on these loans, although some may be required, depending on the borrower's credit standing. A compensating balance may also be required. This means that some portion of the loan must remain in one of the business's accounts at the bank.
  7. Cooperative buying groups
    Small retailers  have formal buying groups to reduce buying costs, obtain price concessions and benefit from the market and merchandising knowledge of others.
  8. Customer traffic flow is generally to the?
  9. Economic Order Quantity
    the point at which all of the costs associated with inventory are minimized

    • EOQ = optimum order size
    • D = annual demand on the number of units
    • O = Cost to place one Order
    • S = storage cost per unit

    • EOQ =  2 x D x O
    •                     S
  10. Examples of building requirements
    • 1. Suitability for the intended use
    • 2. Customer Accessability
    • 3. Internal & external traffic flow
    • 4. Romm for expansion
    • 5. Internal & external appearance
    • 6. Environmental conditions
    • 7. Parking facilities
    • 8. Equipment of fixture requirements
  11. Factors that should be considered when looking for a location for your business
    • a. Nearness to your target market
    • b. Accessability of labor
    • c. Availability and cost of utilities
    • d. Attitude of potential neighbors towards your business
    • e. Character of the neighborhood, does it reflect the image of your business
    • f. Room for expansion?
    • g. Personal preferance
  12. Feasibility study
    designed to help you determine whether it is possible to open your business and whether its chances of success are good

    • a. Market for your product
    • b. Location for your business
    • c. Financial requirements for your business & your ability to meet them
    • d. Legal requirements of your business
  13. FIFO method
    the first goods purchased are the first goods sold
  14. Free-flow traffic pattern
    Less effiicient use of space, but greater visual appeal;

    allows customers to move in any direction at their own speed.

    Results in curving aisle and greater flexibility in merchandise presentation.
  15. Grid pattern traffic flow
    Plainer, block-looking layout seen in a tpical supermarket

    provides more merchandise exposure, ease, security, and cleaning.
  16. lnventory
    Those goods or stock of goods which are held for resale.
  17. lnventory turnover
    The number of times the average inventory has been sold or used up during a period.
  18. Layout
    The logical arrangement of physical facilities in order to provide efficiency of business operations.
  19. LIFO method
    the most recently purchased goods are the first sold.
  20. Manufacturer
    Cheif source of supplies to wholesalers
  21. Most to Least valuable floor space in retail store
    • 1. Right front
    • 2. Center front & Right middle
    • 3. Left front center middle
    • 4. Left middle
    • 5. Least is back

    • 1. First floor (ground)
    • 2. Higher the floor, lower selling value
    • 3. Basement
  22. Objectives of a retail store
    • a. To properly display to maximize sales
    • b. Customer convenience & service
    • c. Convenience & attractiveness to contribute to a customers continued patronage
    • d. Efficient layout contribute to the operating economy
    • e. Protection of store merchandise & equipment against shoplifting
    • f. Customer traffic flow is generally to the right
  23. Physical requirements of your business, what to look for?
    • a. Zoning restrictions
    • b. Cost of facilities & terms of leases
    • c. Availability & reliability of materials & supplies
    • d. Appropriateness of facilities & potential cost of remodeling the site for your specifications
    • e . The accessibility of storage & parking facilities
  24. Purchasing
    a risky long-term commitment, and for this reason, entrepreneurs are encouraged to rent rather than buy or build a first building they occupy
  25. Quantity discount
    Price discount on the price of each unit based on the quantity purchased
  26. Trade discount
    Usually offered by manufacturers & wholesalers;

    reduction from list or catalog prices
  27. Wholesaler
    a. Merchant middleman who buys and takes title to goods for resale

    b. chief source of supply for small firms - both service and retail
Card Set
SBM I EXam 4
SBM I Exam 4