CRA CRA Retail Financial Analysis & Metrics 1 — Questions and Answers
Question 1: How is gross margin percentage calculated?
- (Revenue − COGS) / Revenue × 100 (Correct answer)
- COGS / Revenue × 100
- Net income / Revenue × 100
- Operating expenses / Revenue × 100
Correct answer: (Revenue − COGS) / Revenue × 100
Gross margin percentage is gross profit (revenue minus cost of goods sold) divided by revenue, expressed as a percentage.
Question 2: What does 'sell-through rate' measure in retail inventory analysis?
- Percentage of received inventory sold within a period (Correct answer)
- Rate at which items are returned by customers
- Vendor on-time delivery percentage
- Percentage of SKUs on promotion
Correct answer: Percentage of received inventory sold within a period
Sell-through rate measures the proportion of inventory received that was sold during a specific time period, indicating product demand.
Question 3: Which financial metric shows how many times a retailer sells and replaces its inventory in a year?
- Days sales outstanding
- Inventory turnover ratio (Correct answer)
- Current ratio
- Debt-to-equity ratio
Correct answer: Inventory turnover ratio
Inventory turnover ratio equals COGS divided by average inventory and indicates how efficiently a retailer manages its stock.
Question 4: A store's same-store sales (SSS) increased 5% year-over-year. What does this indicate?
- Five new store locations opened
- Existing store locations grew revenue by 5% (Correct answer)
- Online sales grew 5%
- Total company sales grew 5%
Correct answer: Existing store locations grew revenue by 5%
Same-store sales (also called comparable-store sales) measures revenue growth at locations open for at least one year, excluding new stores.
Question 5: What is 'shrink' in retail financial reporting?
- Planned markdown on seasonal items
- Inventory loss due to theft, damage, or administrative error (Correct answer)
- Reduction in store headcount
- Vendor deduction from invoice
Correct answer: Inventory loss due to theft, damage, or administrative error
Shrink refers to the difference between recorded inventory and actual physical inventory, caused by theft, damage, or errors.
Question 6: Which metric evaluates profitability per unit of selling space?
- Return on assets
- Sales per square foot (Correct answer)
- Gross margin return on inventory investment
- Net present value
Correct answer: Sales per square foot
Sales per square foot measures revenue generated per unit of retail floor space, helping assess space productivity.
CRA CRA Retail Financial Analysis & Metrics 1
How is gross margin percentage calculated?