Multiple Choice
Which of the following best describes what net sales represent on a company's income statement?
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4. Merchandising Operations
Net Sales
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following best describes net sales?
A
The amount of income left after taxes have been deducted
B
Gross profit minus operating expenses
C
Total revenue minus sales returns, allowances, and discounts
D
Total revenue before any deductions
Verified step by step guidance1
Understand the concept of net sales: Net sales represent the actual revenue a company earns from its sales activities after accounting for deductions such as sales returns, allowances, and discounts.
Identify the components of total revenue: Total revenue is the gross amount earned from sales before any deductions are applied.
Learn about sales returns, allowances, and discounts: Sales returns refer to products returned by customers, allowances are reductions in price due to defects or other issues, and discounts are reductions in price offered to customers.
Subtract the deductions from total revenue: To calculate net sales, subtract the sum of sales returns, allowances, and discounts from the total revenue.
Recognize the distinction between net sales and other financial metrics: Net sales differ from metrics like gross profit (revenue minus cost of goods sold) and net income (profit after all expenses and taxes).
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