Multiple Choice
The relative proportions in which a company's products are sold is referred to as:
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4. Merchandising Operations
Net Sales
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The key objective of a small business owner is to generate:
A
Operating expenses, which are the costs incurred in running the business
B
Net income, which is calculated before deducting any expenses
C
Net sales, which represent total sales minus returns, allowances, and discounts
D
Gross sales, which include all sales before any deductions
Verified step by step guidance1
Understand the key terms: Net sales, Gross sales, Operating expenses, and Net income. Net sales are calculated as total sales minus returns, allowances, and discounts. Gross sales represent all sales before any deductions. Operating expenses are the costs incurred in running the business, and Net income is the profit after deducting all expenses.
Identify the objective of the small business owner. Typically, the goal is to maximize profitability, which is closely tied to net sales and net income.
Recognize that net sales are a critical metric for evaluating the revenue generated by the business after accounting for returns, allowances, and discounts. This figure is essential for assessing the true earning potential of the business.
Understand that gross sales provide an initial measure of total sales but do not account for deductions such as returns, allowances, and discounts. Therefore, net sales offer a more accurate representation of the business's revenue.
Conclude that the key objective of a small business owner is to focus on net sales, as it reflects the actual revenue generated after necessary adjustments, which is crucial for determining profitability and making informed financial decisions.
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