The Open-to-Buy calculator computes Open-To-Buy based on the planned sales, markdown and the beginning and ending monthly inventory.
INSTRUCTIONS: Choose units and enter the following;
- (PS) Planned Sales
- (PM) Planned Markdown
- (PEMI) Planned End of Month Inventory
- (PBMI) Planned Beginning of Month Inventory
Open-to-Buy (OTB): The calculator returns OTB in U.S. dollars. However this can be automatically converted to compatible units via the pull-down menu.
The Math / Science
Open-To-Buy can be calculated in either units or dollars. OTB is essentially the difference between how much inventory is needed and how much is actually available. This includes inventory on hand, in transit and any outstanding orders.
OTB = PS + PM + PEMI - PBMI
where:
- OTB - Open-to-Buy
- PS - Planned Sales
- PM - Planned Markdowns
- PEMI - Planned Ending Monthly Inventory
- PBMI - Planned Beginning Monthly Inventory
For example, a retailer has an inventory level of $150,000 on July 1st and planned $152,000 End of Month inventory for July 31st.
The planned sales for the store are $48,000 with $750 in planned markdowns. Therefore, the retailer has $50,750 Open-To-Buy at retail.
Retail Calculator
- Average Inventory is computed by dividing the sum of the merchandise inventory taken during one year by the number of such inventories.
- Asset(/Stock) to Sales Ratio is used to compare how much in assets a company has relative to the amount of revenues the company can generate using their assets.
- Quick Ratio aka Acid Test is a liquidity ratio that measures the ability to pay short-term liabilities with cash and assets quickly convertible to cash.
- Break-Even Analysis equation shows the point in business where the sales equal the expenses.
- Cost of Goods Sold is simply the difference between the cost of goods available for sale and the ending inventory.
- Gross Profit is the difference between the net sales (or revenue) and the cost of goods or services sold. It is also known as the gross margin or Sales profit.
- Gross Profit Percentage is the difference between the net sales and the cost of goods sold (or services rendered) divided by the net sales times a hundred.
- Gross Profit Margin measures how much of each sales dollar is used to finance the direct inputs required to manufacture or merchandise the product sold.
- Gross Margin Ratio equation is used to compute the profitability of a company on selling its inventory or merchandise.
- Gross Margin Return on Investment [GMROI] calculation can be used to measure the performance the entire shop, but it is more effective if used for a particular department or category of merchandise.
- Inventory Turnover Ratio reveals how many times inventory turns over (is sold and replaced) in a period.
- Initial Markup % is the comparison of the amount of money, expressed as a percentage of initial cost, that a retailer adds to the price of goods.
- Maintained Markup reveals the impact of markdowns (reductions) on the Initial Markup.
- Maintained Markup Percentage is the percentage of net sales.
- Markup is the difference between cost of a good or service and its selling price.
- Net Sales is the sales revenue less sales returns and allowances and sales discounts.
- Open-To-Buy is the difference between how much inventory is needed and how much is actually available.
- Reductions are the combined cost of making a specified product/service cheaper or less in amount.
- Retail Price is the price at which the manufacturer recommends that the retailer sell the product.
- Sales per Square Foot is most commonly used for planning inventory purchases.
- Sell-Through Rate/Analysis is the selling activity of a product within a defined period of time.
- Total Stock Return is the appreciation in the price plus any dividends paid, divided by the original price of the stock.
Resource:
- Waters, Shari. "Retail Sales Math Formulas and Equations." About.com. About.com, n.d. Web. 14 July 2015. <http://retail.about.com/od/retailingmath/a/retail_formulas.htm>.