Which of the following best describes the rate at which a business grows or increases its revenue from sales?

• A. Accounts Receivable Turnover
• B. Net Sales
• C. Gross Profit Margin
• D. Sales Growth Rate

Answer: (D)

Verified step by step guidance

1. Understand the concept of Sales Growth Rate: It measures the rate at which a business's revenue from sales increases over a specific period. It is a key indicator of business performance and growth.
2. Differentiate between the given options: Accounts Receivable Turnover measures how efficiently a company collects its receivables, Net Sales refers to total revenue minus returns and allowances, and Gross Profit Margin indicates profitability after deducting the cost of goods sold.
3. Recognize that none of the other options directly measure the rate of revenue growth. Sales Growth Rate specifically tracks the percentage increase in sales revenue over time.
4. To calculate Sales Growth Rate, use the formula: $\left(\frac{(S_t-S_{\mathrm{t-1}})}{S_{\mathrm{t-1}}}\right)\times 100$, where St is the sales revenue for the current period and St-1 is the sales revenue for the previous period.
5. Apply this formula to determine the Sales Growth Rate for a given set of sales data, ensuring you have accurate figures for both the current and previous periods.