In this section:
Application: Sophie's Treats
States :
Les Gourmandises de Sophie is a company specializing in the sale of artisanal pastries. For this period, it wishes to evaluate its commercial margin by taking into account the variation in stock. The available financial data are as follows: the turnover excluding tax is €50, the cost of purchasing goods sold is €000, the initial stock is €30 and the final stock is €000.
Work to do :
- Calculate the stock variation for the company Les Gourmandises de Sophie.
- What is the adjusted cost of goods sold taking into account the change in inventory?
- Determine the company's gross margin.
- Calculate the company's sales margin rate (%).
- Analyze the impact of inventory variation on sales margin.
Proposed correction:
-
To calculate the inventory change, we need to subtract the initial inventory from the ending inventory:
Final stock – Initial stock = €8 – €000 = €5.
The stock variation is therefore €3. The stock has increased, which is positive for the company. -
Adjusted purchase cost is calculated by subtracting the positive inventory change from the cost of goods sold.
Adjusted purchase cost = Cost of goods purchased – Inventory variation
Replacing with the values: €30 – €000 = €3.
The adjusted purchase cost is €27, which represents a decrease in the total cost. -
The gross sales margin is calculated by subtracting the adjusted purchase cost from the net sales:
Gross sales margin = Net sales – Adjusted purchase cost
Replacing the values: €50 – €000 = €27.
The gross commercial margin is €23.
-
The commercial margin rate is calculated using the following formula:
Margin rate = (Gross sales margin ÷ Adjusted purchase cost) x 100
Substituting the values: (€23 ÷ €000) x 27 = 000%.
The commercial margin rate is 85,19%. -
The increase in inventory helped reduce adjusted purchasing cost, thereby increasing gross margin. This reflects efficient inventory management, which is necessary to maintain a high margin and improve profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Final stock – Initial stock |
| Adjusted purchase cost | Cost of purchasing goods – Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |
Application: The Wines of France
States :
Les Vins de France, a wine and spirits wholesaler, wants to evaluate the efficiency of its inventory management. For this analysis, the company has the following data for the last financial year: a turnover excluding tax of €80, a cost of goods sold of €000, an opening inventory of €50 and a closing inventory of €000.
Work to do :
- Calculate the stock variation at Les Vins de France.
- Adjust the purchase cost to reflect this inventory change.
- Determine the company's gross sales margin after adjustment.
- What is the commercial margin rate?
- Discuss the effect of direction of inventory change on sales performance.
Proposed correction:
-
To calculate inventory change, subtract ending inventory from beginning inventory:
€4 – €000 = €2.
The stock variation is -€2, indicating a decrease in stock. -
The adjusted purchase cost is calculated by adding the inventory variation to the initial purchase cost:
Adjusted purchase cost = €50 + €000 = €2.
The adjusted purchase cost is therefore €52 due to the reduction in stock. -
The gross sales margin is calculated by subtracting the adjusted purchase cost from the net sales:
€80 – €000 = €52.
The gross commercial margin amounts to €28.
-
To calculate the trade margin rate, apply the following formula:
Margin rate = (€28 ÷ €000) x 52 = 000%.
The commercial margin rate is therefore 53,85%. -
The inventory decrease increased the adjusted purchase cost, thereby reducing the sales margin. The company should evaluate whether the inventory decrease is a consequence of high demand or insufficient replenishment to adapt its strategies.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Initial stock – Final stock |
| Adjusted purchase cost | Cost of purchasing goods + Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |
Application: Technosolutions SA
States :
Technosolutions SA, an innovative IT company, is checking its annual results to adapt its sales strategies. The available data are: a turnover excluding tax of €100, a cost of goods sold of €000, an initial stock of €65, and a final stock of €000.
Work to do :
- Evaluate the stock variation carried out by Technosolutions SA.
- Adjust the cost of goods sold by incorporating this inventory variation.
- Calculate the gross sales margin of Technosolutions SA after adjustment.
- Determine the commercial margin rate for the year.
- Consider the strategic implications of this inventory variation on product management.
Proposed correction:
-
The stock variation is calculated by the difference between the final stock and the initial stock:
€15 – €000 = €10.
The stock variation is €5, indicating an increase. -
To adjust the purchase cost, subtract the positive change from the original cost:
€65 – €000 = €5.
The adjusted purchase cost is therefore €60. -
The gross sales margin is calculated by subtracting the adjusted purchase cost from the net sales:
€100 – €000 = €60.
The gross commercial margin is €40.
-
The commercial margin rate is obtained by applying the following formula:
Margin rate = (€40 ÷ €000) x 60 = 000%.
The commercial margin rate for the year is 66,67%. -
Increasing inventory indicates an anticipation of increased demand or purchasing optimization. This is strategic if the company expects growth or price fluctuations.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Final stock – Initial stock |
| Adjusted purchase cost | Cost of purchasing goods – Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |
Application: Organic Flavors
States :
Les Saveurs Bio, a chain of stores selling organic products, recently changed its inventory management policy. For the financial year in question, they reported a turnover excluding tax of €120, a cost of goods sold of €000, an opening inventory of €70, and a closing inventory of €000.
Work to do :
- Calculate the stock variation at Les Saveurs Bio.
- What is the adjusted purchase cost with this new stock variation?
- Calculate the gross margin taking this variation into account.
- What is the percentage of the commercial margin rate?
- Interpret this inventory change and its potential impact on future profitability.
Proposed correction:
-
The stock variation is presented as the difference between the initial stock and the final stock:
€20 – €000 = €15.
The stock variation is -€5. -
Include this variation in the initial purchase cost:
Adjusted purchase cost = €70 + €000 = €5.
The adjusted purchase cost is €75. -
Deduct the adjusted cost from the net sales to determine the gross margin:
€120 – €000 = €75.
The gross commercial margin is €45.
-
When calculating the trade margin rate, use the formula:
Margin rate = (€45 ÷ €000) x 75 = 000%.
The commercial margin rate is 60%. -
Decreased inventory suggests either high unanticipated demand or low replenishment. This situation could indicate a risk of stockouts in the future, which could affect profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Initial stock – Final stock |
| Adjusted purchase cost | Cost of purchasing goods + Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |
Application: ElectroniX
States :
ElectroniX, an electronics store, wants to analyze its sales performance by integrating inventory changes into its calculations. The data for the period are a net sales figure of €150, a cost of goods purchased of €000, an initial inventory of €90, and an ending inventory of €000.
Work to do :
- What is the stock variation at ElectroniX?
- Adjust the cost of goods sold to reflect this inventory change.
- Calculate the gross margin.
- Determine the commercial margin rate.
- What does this inventory change mean for the company's short-term performance?
Proposed correction:
-
For inventory change, subtract ending inventory from beginning inventory:
€10 – €000 = €8.
The stock variation is -€2. -
Adding this variation to the original cost of goods:
€90 + €000 = €2.
The adjusted purchase cost is therefore €92. -
The gross sales margin is calculated by subtracting the adjusted purchase cost from the net sales:
€150 – €000 = €92.
The gross commercial margin is €58.
-
Margin rate is calculated as follows:
Margin rate = (€58 ÷ €000) x 92 = 000%.
The commercial margin rate is 63,04%. -
The decline in inventory may indicate a faster flow of sales than replenishment, which is positive for product rotation, but it implies a need for strategic improvement in replenishment to maximize availability without excess cost.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Initial stock – Final stock |
| Adjusted purchase cost | Cost of purchasing goods + Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |
Application: Fashion & Luxury
States :
Mode & Luxe, a high-end clothing brand, evaluates its results by taking into account inventory management. To do this, it has the following data: net sales of €200, cost of purchasing goods of €000, initial inventory of €120 and final inventory of €000.
Work to do :
- Calculate the stock variation of Fashion & Luxury.
- Adjust cost of goods sold for inventory change.
- Determine the gross commercial margin thus obtained.
- What is the commercial margin rate for this period?
- What does this stock variation dynamic represent for the company?
Proposed correction:
-
The stock variation is calculated by subtracting the ending stock from the beginning stock:
€30 – €000 = €25.
The stock variation is -€5. -
To adjust the initial cost, add this variation:
€120 + €000 = €5.
The adjusted purchase cost therefore amounts to €125. -
The gross commercial margin is obtained by the difference between the net turnover and the adjusted purchase cost:
€200 – €000 = €125.
The gross commercial margin is €75.
-
The commercial margin rate is calculated as follows:
Margin rate = (€75 ÷ €000) x 125 = 000%.
The commercial margin rate for the period is 60%. -
The inventory reduction could signal a good turnover rate, indicating an alignment of products according to demand. However, Fashion & Luxury should ensure that it maintains sufficient storage to respond promptly to high sales.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Initial stock – Final stock |
| Adjusted purchase cost | Cost of purchasing goods + Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |
Application: GreenGarden
States :
GreenGarden, a company specializing in the sale of plants and gardening equipment, evaluates its operational efficiency. The following data are available: a turnover excluding tax of €60, a cost of goods of €000, an initial inventory of €36 and a closing inventory of €000.
Work to do :
- Calculate the stock variation at GreenGarden.
- Adjust the cost of goods based on this inventory change.
- Calculate the gross margin.
- What is the commercial margin rate?
- Analyze what this inventory change reveals for future inventory planning.
Proposed correction:
-
The stock variation is calculated by subtracting the ending stock from the beginning stock:
€7 – €500 = €6.
The stock variation is -€1. -
Adding this variation to the cost of goods:
€36 + €000 = €1.
The adjusted purchase cost is therefore €37. -
For gross margin, subtract adjusted cost from net sales:
€60 – €000 = €37.
The gross commercial margin is €22.
-
The commercial margin rate is calculated using the formula:
Margin rate = (€22 ÷ €500) x 37 = 500%.
The commercial margin rate is 60%. -
The decrease in inventory signals that the company could leverage effective product rotation. GreenGarden should ensure that inventory levels are adjusted to help sales growth and avoid stockouts.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Initial stock – Final stock |
| Adjusted purchase cost | Cost of purchasing goods + Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |
Application: RestoExpress
States :
RestoExpress is a fast food chain that analyzes its profitability by taking into account inventory management. For the past quarter, here are the data: net sales of €90, cost of purchasing goods of €000, initial inventory of €50 and final inventory of €000.
Work to do :
- What is the stock variation for RestoExpress?
- Adjust the purchase cost to account for this variation.
- Calculate the gross margin.
- What is the commercial margin rate?
- What impact can we anticipate on short-term profitability with this variation in stock?
Proposed correction:
-
To determine the inventory change, subtract the opening inventory from the ending inventory:
€7 – €000 = €5.
The stock change is €2, indicating an increase. -
Adjust the purchase cost by subtracting this variation from the initial cost:
€50 – €000 = €2.
The adjusted purchase cost is therefore €48. -
The gross sales margin is obtained by subtracting the adjusted purchase cost from the turnover:
€90 – €000 = €48.
The gross commercial margin amounts to €42.
-
Calculate the commercial margin rate:
Margin rate = (€42 ÷ €000) x 48 = 000%.
The commercial margin rate is 87,50%. -
The increase in inventory reflects an investment in inventory in anticipation of demand. RestoExpress may need to adapt its sales strategies to avoid the risk of overstocking and help maintain profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Final stock – Initial stock |
| Adjusted purchase cost | Cost of purchasing goods – Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |
Application: NutriSaine
States :
NutriSaine, a health food retailer, wants to assess its financial performance. The data provided are a turnover excluding tax of €75, a cost of goods of €000, an opening inventory of €45 and a closing inventory of €000.
Work to do :
- Calculate the stock variation at NutriSaine.
- Adjust the purchase cost based on this inventory variation.
- Determine the gross margin.
- What is the commercial margin rate?
- Discuss the implications of this inventory change for the upcoming sales strategy.
Proposed correction:
-
The stock variation is calculated by the difference between the final stock and the initial stock:
€4 – €500 = €3.
The stock variation is €1. -
Let's adjust the purchase cost taking this variation into account:
€45 – €000 = €1.
The adjusted purchase cost is therefore €44. -
The gross sales margin is determined by subtracting the adjusted purchase cost from the net sales:
€75 – €000 = €44.
The gross commercial margin amounts to €31.
-
The commercial margin rate is calculated as follows:
Margin rate = (€31 ÷ €000) x 44 = 000%.
The commercial margin rate is 70,45%. -
This increase in inventory signals preparation for a potential increase in demand. NutriSaine can adjust its sales forecasts to maximize available opportunities while avoiding overstocking pressures.
Formulas Used:
| Title | Formulas |
|---|---|
| Stock variation | Final stock – Initial stock |
| Adjusted purchase cost | Cost of purchasing goods – Stock variation |
| Gross sales margin | Sales excluding VAT – Adjusted purchase cost |
| Commercial margin rate (%) | (Gross sales margin ÷ Adjusted purchase cost) x 100 |