Multiple Choice
The amount of current assets minus current liabilities is called:
21
views
4. Merchandising Operations
Net Sales
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following is most directly used to measure a company's profit growth over time?
A
Comparing net income across periods
B
Analyzing gross profit margin only
C
Reviewing total assets on the balance sheet
D
Calculating net sales for the current period
Verified step by step guidance1
Understand the concept of profit growth: Profit growth refers to the increase in a company's profitability over time, typically measured by comparing financial performance metrics across different periods.
Identify the key metric for measuring profitability: Net income is the most comprehensive measure of a company's profitability, as it accounts for all revenues and expenses, including operating, non-operating, and tax-related items.
Explain why comparing net income across periods is relevant: By comparing net income from one period to another, you can directly assess whether the company's profitability has increased, decreased, or remained stable over time.
Clarify why other options are less relevant: Analyzing gross profit margin only focuses on a specific aspect of profitability (sales minus cost of goods sold) and does not provide a complete picture. Reviewing total assets on the balance sheet measures financial position, not profitability. Calculating net sales for the current period only provides revenue data, not profit growth.
Conclude that comparing net income across periods is the most direct and comprehensive method to measure a company's profit growth over time.
9:04mWatch next
Master Net Sales:Sales Discounts (Gross Method) with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
