The loyalty of customers to a business is called _____, and it can have a significant impact on net sales.

• A. gross profit
• B. accounts receivable
• C. net income
• D. customer retention

Answer: (D)

Verified step by step guidance

1. Understand the concept of customer retention: Customer retention refers to the ability of a business to retain its customers over time. It is a key factor in maintaining consistent revenue and profitability.
2. Analyze the impact of customer retention on net sales: Loyal customers are more likely to make repeat purchases, which directly contributes to net sales. High customer retention reduces the need for extensive marketing efforts to acquire new customers.
3. Differentiate customer retention from other financial terms: Gross profit refers to the difference between sales revenue and the cost of goods sold. Accounts receivable represents money owed to the business by customers. Net income is the profit after all expenses are deducted. Customer retention is distinct as it focuses on maintaining customer loyalty.
4. Recognize the importance of customer retention in financial accounting: Businesses often measure customer retention rates to assess the effectiveness of their strategies in maintaining customer loyalty and its impact on financial performance.
5. Apply this understanding to the problem: The loyalty of customers to a business is referred to as customer retention, which plays a significant role in influencing net sales by ensuring repeat business and reducing customer acquisition costs.