October 6, 2016 admin

Formulas, Definitions and Guides

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  • b

  • In New Units. Net operating cost divided by total variable gross P.N.V.S. Net new unit sales required to cover net operating cost.

  • c

  • Total current assets divided by total current liabilities is an indication of working capital position. Guide: Should be 2 to 1 (2:1) ratio.

  • d

  • The amount of borrowed capital compared to the dealer's invested capital. Guide: The debt-to-equity ratio should be no more than 1 to 1 (1:1).

  • f

  • Assets that are difficult to turn into cash, such as obsolete parts, over-aged vehicle inventories, past due accounts receivable or excessive equipment.

  • g

  • Computed amount equal to the recommended minimum working capital plus net equipment and finance receivables deferred. Suggested minimum operating investment to capitalize a dealership.
  • Computed amount equal to the recommended minimum working capital plus net equipment and finance receivables deferred. Suggested minimum operating investment to capitalize a dealership.

  • l

  • A method of inventory valuation that assumes the goods sold in any period are those most recently acquired, and the goods on hand at the end of the period are considered to have been in inventory the longest.
  • A method of inventory valuation that assumes the goods sold in any period are those most recently acquired, and the goods on hand at the end of the period are considered to have been in inventory the longest.

  • n

  • Sum of Cash + Finance Contracts +Marketable Securities + Accounts Receivable New Vehicle + Vehicle Holdback + New Car, Truck, Demo & Used Vehicles CPO Inventories LESS Notes Payable New Vehicle & DEMOS, Overdrafts/Lines of Credit, Customer Deposits & Customer Accommodations-SVC Contracts/Rep Refund. (Total should exceed an average month's total expense).
  • Corporation: capital stock, plus retained earnings, less dividends declared. Partnership or proprietorship: investment less drawing. Remaining investment.
  • Total overhead expense, less total parts and service gross. Indicates the costs which must be covered by new and used variable gross to break even on overall dealership operations. Overhead Expenses not absorbed by Parts and Service Gross.
  • Total overhead expense, less total parts and service gross. Indicates the costs which must be covered by new and used variable gross to break even on overall dealership operations. Overhead Expenses not absorbed by Parts and Service Gross.
  • This is the dollar value of dealership's Net Working Capital determined necessary to sustain the level of operations of the dealership envisioned in the contractual agreement between the dealership and manufacturer. Many manufacturers recompute the "standard" periodically based on the dealership's actual operating practices. The guide calculation is based on the dealer's operating practices for non-cash accounts, plus an average month expense supply of cash.
  • Net investment plus profit year-to-date after taxes or excess of total assets over total liabilities. For LIFO dealers, add one-half of the LIFO reserve to net investment. Owner's equity in business.
  • Inventory of new cars, trucks, and demonstrators, less notes payable new vehicles and demos. Guide: Should equal 100% equity.

  • o

  • Semi-fixed expenses (new and used) plus parts and service expenses plus fixed expense and dealer salary. Expenses that do not vary directly with volume.

  • p

  • Parts inventory divided by average month's cost of parts sales equals parts inventory month's supply. Parts cost of sales=total parts sales less other merchandise sales less grosses for wholesale and shop jobbing incentives, other merchandise, discounts earned, and inventory adjustment. Guide: 2 ½ month's supply for large dealers to 4 ½ month's supply for smaller dealers.

  • r

  • Net profit before income tax, annualized, divided by operating investment. (Working capital plus net equipment (cost less depreciation) plus finance receivables deferred-net.) Return on actual amount of business capital.

  • s

  • Total departmental (new or used) gross less total variable and total semi-fixed expenses. Department operating profit before allocation of fixed expense.
  • Total parts, service and body shop gross profits divided by the sum of total fixed expenses, parts, service & body shop sales expense and dealer's salary. Guide: Benchmark is 70% - 100%.

  • t

  • Net cash + Marketable Securities and 50% of Used Vehicle inventory, less customer recommendations for service contracts/Repo refunds. Guide: Over 200% of average month expenses.
  • Net cash + Marketable Securities and 50% of Used Vehicle inventory, less customer recommendations for service contracts/Repo refunds. Guide: Over 200% of average month expenses.

  • u

  • Number of vehicles currently in operation in a given market area. Includes ten model years of Ford vehicles (also L-M if a dual dealer) that were registered as of July 1 of the previous year.
  • Number of vehicles currently in operation in a given market area. Includes ten model years of Ford vehicles (also L-M if a dual dealer) that were registered as of July 1 of the previous year.
  • Cost of sales during a 30-day period, divided by number of working days equals daily rate cost of sales. Inventory dollars, divided by daily rate cost of sales equals daily rate cost of sales. Inventory dollars, divided by daily rate cost of sales equals dollar day's supply of inventory. Guide: 30 days
  • Number of used vehicles sold during a 30-day period, divided by number of selling days equals daily sales rate. Number of used vehicles in inventory, divided by daily sales rate equals day's supply. Guide: 30 days

  • w

  • Total current assets plus LIFO reserve less total current liabilities equals actual working capital.
  • Total current assets plus LIFO reserve less total current liabilities equals actual working capital.