Multiple Choice
Which of the following statements regarding the operating cycle of a merchandising company is FALSE?
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4. Merchandising Operations
Service Company vs. Merchandising Company
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Which of the following best describes the primary source of revenue for service companies?
A
Sales of physical goods to customers
B
Fees earned from providing intangible services to customers
C
Interest income from investments
D
Dividends received from subsidiaries
Verified step by step guidance1
Understand the nature of service companies: Service companies primarily provide intangible services rather than physical goods. Their revenue is generated from the services they offer to customers.
Analyze the options provided: The first option, 'Sales of physical goods to customers,' refers to companies that sell tangible products, which is not the primary source of revenue for service companies.
Evaluate the second option: 'Fees earned from providing intangible services to customers' aligns with the definition of service companies, as their revenue comes from offering services such as consulting, education, or healthcare.
Consider the third option: 'Interest income from investments' is a secondary source of revenue and not the primary focus of service companies.
Review the fourth option: 'Dividends received from subsidiaries' is also not a primary source of revenue for service companies, as it pertains to investment income rather than operational revenue.
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