Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Given the information above, which of the following is the gross margin percentage?

Gross margin percentage = \frac{\text{Cost of Goods Sold}}{\text{Net Sales}} \times 100\%

Gross margin percentage = \frac{\text{Net Sales} - \text{Operating Expenses}}{\text{Net Sales}} \times 100\%

Gross margin percentage = \frac{\text{Net Sales}}{\text{Cost of Goods Sold}} \times 100\%

Gross margin percentage = \frac{\text{Net Sales} - \text{Cost of Goods Sold}}{\text{Net Sales}} \times 100\%

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Verified step by step guidance

Step 1: Understand the concept of gross margin percentage. Gross margin percentage is a financial metric used to assess a company's profitability by comparing its gross margin to its net sales. It indicates how much profit a company makes after deducting the cost of goods sold (COGS) from its net sales.

Step 2: Identify the correct formula for gross margin percentage. Based on the problem, the correct formula is: Gross margin percentage = (Net Sales - Cost of Goods Sold) / Net Sales × 100%. This formula calculates the proportion of sales revenue remaining after covering the cost of goods sold.

Step 3: Gather the necessary data. To calculate gross margin percentage, you need the values for Net Sales and Cost of Goods Sold. These figures are typically provided in the company's income statement.

Step 4: Substitute the values into the formula. Replace 'Net Sales' and 'Cost of Goods Sold' in the formula with the actual values provided in the problem or financial statement.

Step 5: Perform the calculation. Divide the difference between Net Sales and Cost of Goods Sold by Net Sales, then multiply the result by 100 to express the gross margin percentage as a percentage value.