Multiple Choice
EBIT is another term for:
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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
Gross profit equals the difference between net sales and which of the following?
A
Total assets
B
Net income
C
Cost of goods sold
D
Operating expenses
Verified step by step guidance1
Understand the concept of gross profit: Gross profit is a financial metric that represents the difference between net sales and the cost of goods sold (COGS). It measures the profitability of a company's core operations before accounting for other expenses.
Identify the components of the formula: Net sales refers to the revenue generated from sales after deducting returns, allowances, and discounts. Cost of goods sold (COGS) includes the direct costs associated with producing or purchasing the goods sold by the company.
Write the formula for gross profit: Gross profit = Net Sales - Cost of Goods Sold.
Clarify why other options are incorrect: Total assets, net income, and operating expenses are not directly subtracted from net sales to calculate gross profit. These terms relate to other financial metrics or aspects of the business.
Apply the formula conceptually: To calculate gross profit, subtract the cost of goods sold from net sales. This provides insight into how efficiently a company produces or sells its goods.
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