Sales: It means total money collected by an entity on sale of goods. In other words, it is the revenue of the entity which is generated by performing the business activities.
Positive Gross Profit: It means the profit which is made after deducting the making and selling cost associated with its products. In other words, the formula to calculate positive gross profit is,
Net Loss: It means the negative amount which has arrived after deducting various expenses related to the business operations. This negative amount comes when the expenses of a business exceed gross profit.
To explain: The case when business can earn a positive gross profit on its sales and still have a net loss.
Want to see the full answer?
Check out a sample textbook solutionChapter 4 Solutions
FINANCIAL ACCT.FUND.(LOOSELEAF)
- What is profit, how is it earned? Explain its effect on businesses.arrow_forwardGross profit is a measure of the overall profitability of a company. True O Falsearrow_forwardDefine the term gross profit margin. Explain several waysin which management might improve a company’s overallprofit margin.arrow_forward
- Compare and contrast the net income margins of both Company A and B. Do you think the company with the lower net income margin is in absolute financial distress? Explain.arrow_forwardDiscuss the problems a company may have by looking at short term profit as a measure of performance.arrow_forwardWhy do you believe businesses rely heavily on revenue recognition to inflate profits?arrow_forward
- Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales. Group of answer choices. True Falsearrow_forwardProfit maximization objective helps to: a. Increase the liquidity position of the business b. Reduce the risk of the business c. Reduce the investments of the business d. Increase the reserve of the businessarrow_forwardWhy do you think companies use revenue recognition as a primary means for inflating profits?arrow_forward
- How important is profit? How can a company survive when it isn't making a profit? How can a company fail when it is making a large profit?arrow_forwardIf the company have higher profit margin, what will happen? Is it a good sign for the company to proceed with their business?arrow_forwardgross profit margin (gross profit/sales) is an important determinant of NOPAT. identify two factors that can cause gross profit margin to decline. is a a reduction in the gross profit margin always bad news? Explain.arrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning