Multiple Choice
Which of the following statements best describes the difference between markup and margin?
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4. Merchandising Operations
Net Sales
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Which of the following terms refers to the amount a company expects to collect from its customers after deducting sales returns, allowances, and discounts from total sales?
A
Operating Revenue
B
Net Income
C
Net Sales
D
Gross Sales
Verified step by step guidance1
Understand the concept of 'Net Sales': Net Sales refers to the amount a company expects to collect from its customers after deducting sales returns, allowances, and discounts from total sales.
Identify the components of Net Sales: Total Sales is the starting point, and adjustments are made for sales returns (products returned by customers), allowances (price reductions for defective goods or services), and discounts (reductions for early payment or promotional offers).
Compare Net Sales to other terms: Operating Revenue refers to income generated from primary business activities, Gross Sales is the total sales before deductions, and Net Income is the profit after all expenses are subtracted from revenue.
Recognize why Net Sales is the correct term: Net Sales specifically accounts for the deductions mentioned, making it the most accurate term for the amount a company expects to collect from customers.
Apply this understanding to similar problems: When asked about amounts adjusted for returns, allowances, and discounts, always consider Net Sales as the relevant term.
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