IDIS 240 EXAM 2 - EVAN VESTAL -
SPRING
Operating Expenses (OE) - ✔️✔️All costs necessary to provide services for the
distributor's customer:
- Warehouse cost
- Inventory holding cost
- Transportation cost
- Bad Debt Expense: Money you expect to not get back, "This man owes me $200 from
30 years ago"
Selling, General, and Administrative Expenses (SG&A) - ✔️✔️- Salaries, commissions,
and other payroll costs that we pay our executives and sales persons
- Outside Sales: Travel costs, Entertainment costs, Advertising Costs
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) -
✔️✔️Margin - OE - SG&A
Depreciation and Amortization (DA) - ✔️✔️- Expensive that captures the reduction in
value of assets over time
- Using it as an expense to decrease your income, to lower your taxes
Earnings Before Interest, and Taxes (EBIT) - ✔️✔️Represents the profit before interest
and taxes are subtracted
Free On Board (FOB) Destination - ✔️✔️Manufacturer pays to have it delivered, own
the product while it's being transported
Free On Board (FOB) Shipping Point *** - ✔️✔️Once the manufacturer puts it on the
trust, distributor pays for it and they own it
Trade Discounts - ✔️✔️- Means of adjusting the price for variations in the cost of raw
materials
- Competitive pricing in the marketplace
, - For services provided by the distributor (stocking the item)
Trade Pricing *** - ✔️✔️- A pricing methodology that involves negotiating the actual
price that will be paid as opposed to "list price - a discount" method
- Referred to as matrix pricing, a markup from a confidential negotiated distributor cost
Two drivers to growth of this type
- Increased complexity
- System capabilities
Cash Discounts *** - ✔️✔️- Offered to encourage early payment of invoices and when
taken they will enhance the sellers cash flow
- Amount that can be subtracted by the total amount of the invoice by the distributor
before paying the bill
- Offered as encouragement to a distributor to pay their invoice within a specific amount
of time
- CASH DISCOUNTS ARE NOT GIVEN, they are offered then taken or refused by the
distributor
- Cash discounts are important to profitability
Special Orders - ✔️✔️Usually consist of standard products with slight modifications to
design, finish, materials and packaging
Minimum Order - ✔️✔️Minimum amount you need to order to purchase
Freight Allowed - ✔️✔️Amount that must be purchased to have the manufacturer pay
the cost of the freight for a standard shipment
Claims - ✔️✔️Making a claim that it is broken, damaged, lost. Billing or shipping errors,
shortages
Returns - ✔️✔️You don't get all of your money back, 10-20% restocking fee
Margin Dollars - ✔️✔️- Margin dollars are used to pay employee cost in wages,
benefits, and all other costs of doing business
List Price - ✔️✔️Nationally Advertised Price
Selling Price - ✔️✔️List Price - Trade Discounts
SPRING
Operating Expenses (OE) - ✔️✔️All costs necessary to provide services for the
distributor's customer:
- Warehouse cost
- Inventory holding cost
- Transportation cost
- Bad Debt Expense: Money you expect to not get back, "This man owes me $200 from
30 years ago"
Selling, General, and Administrative Expenses (SG&A) - ✔️✔️- Salaries, commissions,
and other payroll costs that we pay our executives and sales persons
- Outside Sales: Travel costs, Entertainment costs, Advertising Costs
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) -
✔️✔️Margin - OE - SG&A
Depreciation and Amortization (DA) - ✔️✔️- Expensive that captures the reduction in
value of assets over time
- Using it as an expense to decrease your income, to lower your taxes
Earnings Before Interest, and Taxes (EBIT) - ✔️✔️Represents the profit before interest
and taxes are subtracted
Free On Board (FOB) Destination - ✔️✔️Manufacturer pays to have it delivered, own
the product while it's being transported
Free On Board (FOB) Shipping Point *** - ✔️✔️Once the manufacturer puts it on the
trust, distributor pays for it and they own it
Trade Discounts - ✔️✔️- Means of adjusting the price for variations in the cost of raw
materials
- Competitive pricing in the marketplace
, - For services provided by the distributor (stocking the item)
Trade Pricing *** - ✔️✔️- A pricing methodology that involves negotiating the actual
price that will be paid as opposed to "list price - a discount" method
- Referred to as matrix pricing, a markup from a confidential negotiated distributor cost
Two drivers to growth of this type
- Increased complexity
- System capabilities
Cash Discounts *** - ✔️✔️- Offered to encourage early payment of invoices and when
taken they will enhance the sellers cash flow
- Amount that can be subtracted by the total amount of the invoice by the distributor
before paying the bill
- Offered as encouragement to a distributor to pay their invoice within a specific amount
of time
- CASH DISCOUNTS ARE NOT GIVEN, they are offered then taken or refused by the
distributor
- Cash discounts are important to profitability
Special Orders - ✔️✔️Usually consist of standard products with slight modifications to
design, finish, materials and packaging
Minimum Order - ✔️✔️Minimum amount you need to order to purchase
Freight Allowed - ✔️✔️Amount that must be purchased to have the manufacturer pay
the cost of the freight for a standard shipment
Claims - ✔️✔️Making a claim that it is broken, damaged, lost. Billing or shipping errors,
shortages
Returns - ✔️✔️You don't get all of your money back, 10-20% restocking fee
Margin Dollars - ✔️✔️- Margin dollars are used to pay employee cost in wages,
benefits, and all other costs of doing business
List Price - ✔️✔️Nationally Advertised Price
Selling Price - ✔️✔️List Price - Trade Discounts
