Multiple Choice
Which of the following is the best measure of a company's profitability?
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4. Merchandising Operations
Net Sales
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If a company reports total revenue of \$100 and has sales returns and allowances of \$10 and sales discounts of \$5, what is the net sales amount?
A
\$100
B
\$95
C
\$90
D
\$85
Verified step by step guidance1
Step 1: Understand the concept of net sales. Net sales is calculated by subtracting sales returns, allowances, and discounts from total revenue.
Step 2: Identify the given values in the problem. Total revenue is \$100, sales returns and allowances are \$10, and sales discounts are \$5.
Step 3: Write the formula for net sales: Net Sales = Total Revenue - Sales Returns and Allowances - Sales Discounts.
Step 4: Substitute the given values into the formula: Net Sales = \$100 - \$10 - \$5.
Step 5: Perform the subtraction step by step to find the net sales amount. First subtract \$10 from \$100, then subtract \$5 from the result.
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