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In retail and merchandising, profitability is the ultimate measure of success, and it is influenced by several interrelated factors. The basic factors of profitability include sales revenue, cost of goods sold (COGS), operating expenses, and inventory turnover. Each factor interacts with the others to determine the overall profit margin of a business. Understanding the relationship among these factors is essential for buyers and merchandisers, as it helps in strategic decision-making to maximize profitability. Sales revenue is the total income generated from selling merchandise. It is directly influenced by pricing strategy, product selection, demand forecasting, and promotional activities. Higher sales revenue generally contributes to higher profitability, but this depends on the balance with costs. For example, if a retailer sells high volumes of low-margin items, the revenue may be high, but profitability could remain limited unless costs are controlled effectively. Cost of goods sold ___ _____ ________ ______ _______.
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