Multiple Choice
Which of the following formulas is used to calculate the net income ratio?
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4. Merchandising Operations
Net Sales
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Which term best describes a basic published or advertised price before any deductions such as returns, allowances, or discounts are applied?
A
Gross Profit
B
List Price
C
Net Income
D
Net Sales
Verified step by step guidance1
Understand the concept of 'List Price': The list price is the basic published or advertised price of a product or service before any deductions such as returns, allowances, or discounts are applied.
Differentiate between the terms provided: Gross Profit, Net Income, Net Sales, and List Price. Gross Profit refers to revenue minus the cost of goods sold. Net Income is the profit after all expenses, taxes, and deductions. Net Sales is the revenue after returns, allowances, and discounts are subtracted. List Price is the initial price before any deductions.
Identify the key characteristic of the term being asked: The question specifies the price before any deductions, which aligns with the definition of 'List Price'.
Eliminate incorrect options: Gross Profit, Net Income, and Net Sales involve calculations that include deductions or expenses, so they do not match the description of a basic published price.
Conclude that the correct term is 'List Price' based on the definition and the context provided in the question.
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