1. Type of Goods: Goods that are in high demand and are used regularly such as milk, meat, fish, bread, garri, Indomie, soap, matches, etc record more sales. They are said to have a higher turnover than businesses dealing with machines and equipment.
2. Reputation and Goodwill of the Trader: Some traders become popular because of their prompt attention to customers need, their politeness to satisfy whoever that visits their shop. For example; if a wrong or a faulty product was mistakenly sold, it will be accepted by the seller and the customer will be given a refund when the items are returned
3. Terms of Sale: The offer of credit sales and hire purchase facilities to customers can induce people to buy more of their products in a particular shop than from another shop.
4. Regularity in Supply of Goods Sold: Constant supply of goods to a shop will help to lure customers to that shop because each time they come, there will be the availability of the products. But once their regular needs are out of stock, Customers will go elsewhere to obtain the goods. Once their attention is diverted, it may take time for them to return to the original shop.
5. Location of the Shop: Shops must be located in strategic places where people live and at centres where customers can easily access the shop.
6. Advertising and Sales Promotion: Effective advertising and sales promotion stimulate demand and therefore impact the turnover of the products. Advertisement helps to bring the existence of new products to the awareness of people. They also learn about the use of such goods and where they can be found through advertisement.
7. Price of Goods: The price of goods being sold is an important factor in determining the quantity that can be purchased by other people within a period of time. Some shops are known for selling their products at an exorbitant price while others sell the same product at a cheaper price. Customers will always prefer to buy from shops whose products are cheaper and this will help in raising their turnover rate.
8. Increase in the quantity of goods sold
9. The variety of goods sold by the seller
Other Important Ratios
Margin: Margin can be defined as the relationship between the profit and selling price. This is the profit expressed as a percentage of the selling price. This could be derived thus:
:- \( \frac{Gross \; profit}{Selling \; price} \scriptsize \; \times \; 100\)
Mark-Up: Mark-up is the relationship that exists between the profit and the cost of goods sold. The gross profit will be expressed as a percentage of the cost price, i.e.
:- \( \frac{Gross \; profit}{Cost \; price} \scriptsize \; \times \; 100\)
Net Profit as a percentage of turnover.
:- \( \frac{Net \; profit}{Turn \; over} \scriptsize \; \times \; 100\)
Gross profit as a percentage of turnover.
:- \( \frac{Gross \; profit}{Turn \; over} \scriptsize \; \times \; 100\)
Expenses as a percentage of turnover.
:- \( \frac{Expenses}{Turn \; over} \scriptsize \; \times \; 100\)
Manager’s Commission
:- \( \frac{Percentage \; Commission}{100 \; + \; Percentage \; Commission} \scriptsize \; \times \; 100\)
Calculation of Gross Profit to Turnover
Gross profit and net profit can be expressed as percentages of turnover or total sales. This is because it is not only the turnover that matters but also the profits made on it. It is not the gross profit figure that is more important but the net profit figure. Two firms may make the same gross profit but it is the one that makes less expense that will earn more net profit.
Gross Profit = \( \frac{Gross \; profit}{Turn \; over} \scriptsize \; \times \; 100\)
Net Profit = \( \frac{Net \; profit}{Turn \; over} \scriptsize \; \times \; 100\)
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