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

In the context of net sales, buying a cheaper product sometimes can help you _____.

increase your sales returns and allowances

increase your gross profit margin

decrease your net sales

reduce your accounts receivable turnover

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Verified step by step guidance

Understand the concept of net sales: Net sales is calculated as gross sales minus sales returns, allowances, and discounts. It represents the actual revenue earned from sales after accounting for these deductions.

Analyze the impact of buying a cheaper product: A cheaper product can reduce the cost of goods sold (COGS), which is a key component in calculating gross profit margin.

Recall the formula for gross profit margin: Gross profit margin is calculated as ((Net Sales - COGS) / Net Sales) × 100. Lowering COGS while maintaining net sales can increase the gross profit margin.

Consider the relationship between product cost and accounts receivable turnover: Buying a cheaper product does not directly affect accounts receivable turnover, which measures how efficiently a company collects receivables. It is calculated as Net Credit Sales / Average Accounts Receivable.

Conclude that buying a cheaper product can help increase the gross profit margin by reducing the cost of goods sold, while net sales remain unaffected.