purchase return

Examples of purchase return in the following topics:

• Recording Purchases

  • For an example of a purchase discount, a purchaser who buys a 100 dollar item with a purchase discount term 3/10, net 30 only needs to pay 97 dollars as long as he or she pays within 10 days.
  • Purchases are offset by Purchase Discounts, and also Purchase Returns and Allowances.
  • A purchase discount is an offer, from the supplier to the purchaser, to reduce the selling price if payment is made within a certain period of time.
  • For example, a purchaser buying a 100 dollar item with a purchase discount term of 3/10, net 30, will only need to pay 97 dollars if they pay within ten days.
  • Under the net method, purchase discounts are realized right away.

• Percentage Returns

  • Total returns calculate how much the value of the investment has changed since it was first purchased, while annual returns calculate how much the value changed each year.
  • If the investment is a security such as a stock, the final value is the sales price, the initial value is the purchase price, and D is the sum of all dividends received.
  • This type of return is also called the return on investment (ROI), where the numerator is the dollar return.
  • The ROI can be annualized by dividing by the number of years between the purchase and sale of the security.
  • Another common method for finding the annual return is to calculate the internal rate of return (IRR).

• Measuring and Managing Risk

  • Risk is pervasive in the economy and is an essential component in the derivation of an asset's investment return.
  • Risk is pervasive in the economy and is an essential component in the derivation of an asset's investment return.
  • Though the attribution of acceptable inflation can be incorporated into an investment return, the actual pricing and resulting purchasing power of the investment at maturity is unknown and the uncertainty increases with time.
  • Therefore, investment returns compensate holders for the time to maturity via a risk premium .
  • Given that at the time that the investment is called prevailing rates may be lower than at the purchase of the asset, the holder is taking a reinvestment risk at the time of purchase.

• Calculating and Understanding Average Returns

  • If the purchase of a stock led to an ROI of 15% over 5 years, the average ROI is 3% per year.
  • This is a simple way to calculate the average return.
  • A bond purchased at par that pays a 5% coupon per year, will have a return of 25% over 5 years.
  • Average ROI generally does not calculate the actual average rate of return, because it does not incorporate compounding returns.
  • The internal rate of return (IRR) is another commonly used method for calculating the average return .

• Purchase

  • During the purchase decision stage, the consumer may form an intention to buy the most preferred brand or product.
  • The purchase decision is the fourth stage in the consumer decision process and when the purchase actually takes place.
  • According to Philip Kotler, Keller, Koshy and Jha (2009), the final purchase decision, can be disrupted by two factors:
  • From whom they should buy, which is influenced by price point, terms of sale, and previous experience with or awareness of the seller and the return policy.
  • This is also a time during the which the consumer might decide against making the purchase decision.

• Two basic relationship types

  • Varying values of these factors represent situations where the organizations reach greater levels of integration and provide greater returns to both sides of the relationship.
  • This type of relationship portrays the buyer purchasing a product out of routine or pattern.
  • In a functional relationship, previous purchases will often influence later purchases.
  • The buyer must purchase snacks, candy, meat, and drinks, just to name a few.
  • This particular buyer uses a wholesaler to purchase all necessary items.

• Stages of Business Buying

  • The purchasing process is different in both cases and the following is a list of the stages involved in B2B buying:
  • Results become feedback for other stages in future business purchasing decisions
  • This 5 step process is mainly used with new-task purchases and several stages are used for modified rebuy and straight rebuy.
  • Additionally, the purchasing office / manager may have to justify a purchasing decision.
  • Less risky investments yield less returns.

• Purchasing Inventory

  • The scope of inventory management also involves stock replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, returns and defective goods, and demand forecasting .
  • Companies generally use operating funds to finance their purchasing program.
  • These departments can be purchasing, receiving, and accounts payable; or engineering, purchasing, and accounts payable; or a plant manager, purchasing, and accounts payable.
  • Historically, the purchasing department issued purchase orders for supplies, services, equipment, and raw materials.
  • Negotiating is a key skill in purchasing.

• Decision-Making Units

  • Within organizations, major purchases typically require input from various parts of the organization, including finance, accounting, purchasing, information technology management, and senior management.
  • Highly technical purchases, such as information technology systems or production equipment, require the expertise of technical specialists.
  • The economic buyer justifies the purchase by linking it to profit.
  • If a product poses challenges at the installation phase, then the infrastructure buyer and/or DMU steps in to decide whether the return on investment (ROI) is worth the time and money required to set up the infrastructure.
  • The user buyer - This position influences the buying decision at the user level and decides whether the organization will achieve its financial objectives through the purchase.

• Recognition of Revenue at Point of Sale or Delivery

  • Goods sold, especially retail goods, typically earn and recognize revenue at point of sale, which can also be the date of delivery if the buyer takes immediate ownership of the merchandise purchased.
  • If a company cannot reasonably estimate the amount of future returns and/or has extremely high rates of returns on sales, they should recognize revenues only when the right of return expires.
  • Those companies that can estimate the number of future returns and have a relatively small return rate can recognize revenues at the point of sale, but must deduct estimated future returns.