net sales

(noun)

The value of sales generated by a company after deduction of returns, discounts, and the value of damaged or lost goods

Related Terms

Examples of net sales in the following topics:

  • Recording Sales

    • Net sales are gross sales minus sales returns, sales allowances, and sales discounts.
    • In financial ratios that use income statement sales values, "sales" refers to net sales, not gross sales.
    • Sales - Sales Return & Allowances - Sales Discount = Net sales
    • Net sales are gross sales minus sales returns, sales allowances, and sales discounts.
    • The sales figures reported on an income statement are net sales.

  • Total Assets Turnover Ratio

    • Total assets turnover = Net sales revenue / Average total assets
    • "Sales" is the value of "Net Sales" or "Sales" from the company's income statement".
    • In bookkeeping, accounting, and finance, Net sales are operating revenues earned by a company for selling its products or rendering its services.
    • Also referred to as revenue, they are reported directly on the income statement as Sales or Net sales.
    • In financial ratios that use income statement sales values, "sales" refers to net sales, not gross sales.

  • Cost of Goods Sold and Gross Profit

    • Gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service.
    • In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service before deducting overhead, payroll, taxation, and interest payments.
    • The various deductions leading from net sales to net income are as follows:
    • Net income (or Net profit) = Operating profit – taxes – interest
    • These costs are treated as an expense during the period in which the business recognizes income from sale of the goods.

  • Activity Ratios

    • Degree of Operating Leverage (DOL) - (Percent Change in Net Operating Income)/(Percent Change in Sales)
    • Ensuring maximum production and annual sales contracts is integral to maintaining profitability, and maximizing utilization of those fixed assets will enormously impact profitability.

  • Sales Forecast Input

    • Net sales are operating revenues earned by a company for selling its products or rendering its services.
    • Also referred to as revenue, they are reported directly on the income statement as Sales or Net sales.
    • For financial ratios that use income statement sales values, "sales" refers to net sales, not gross sales.
    • Net sales are gross sales minus sales returns, sales allowances, and sales discounts.
    • The sales figures reported on an income statement are net sales.

  • Profit Margin

    • Profit margin measures the amount of profit a company earns from its sales and is calculated by dividing profit (gross or net) by sales.
    • The higher the profit margin, the more profit a company earns on each sale.
    • The gross profit margin calculation uses gross profit and the net profit margin calculation uses net profit .
    • There is a higher risk that a decline in sales will erase profits and result in a net loss or a negative margin.
    • The percentage of net profit (gross profit minus all other expenses) earned on a company's sales.

  • Net Income

    • Net income is a distinct accounting concept from profit.
    • In contrast, net income is a precisely defined term in accounting.
    • For a merchandizing company, subtracted costs may be the cost of goods sold, sales discounts, and sales returns and allowances.
    • As profit and earnings are used synonymously for income (also depending on United Kingdom and U.S. usage), net earnings and net profit are commonly found as synonyms for net income.
    • Net sales (revenue) – Cost of goods sold = Gross profit – SG&A expenses (combined costs of operating the company) = EBITDA – Depreciation & amortization = EBIT – Interest expense (cost of borrowing money) = EBT – Tax expense = Net income (EAT)

  • Overview of Merchandising Operations

    • Merchandising is any practice which contributes to the sale of products to a retail consumer.
    • In the broadest sense, merchandising is any practice which contributes to the sale of products to a retail consumer.
    • At a retail in-store level, merchandising refers to the variety of products available for sale and how the products are displayed to stimulate interest and entice customers to make a purchase.
    • Presidents' Day sales are held shortly thereafter.
    • Merchandising is any practice which contributes to the sale of products to a retail consumer.

  • Preparation of the Statement of Cash Flows: Direct Method

    • For example, in order to find out the cash inflow from a customer we need to know the sales revenue, but the sales revenue is also affected by the accounts receivable account.
    • So, if the sales revenue is 300, and the accounts receivable increases by 20, then the cash received from customers would be 280.
    • In short, they are elements of net income.
    • The direct method for calculating this flow involves deducting from cash sales only those operating expenses that consumed cash.
    • This net income is then indirectly adjusted for items that affected the reported net income but did not involve cash.

  • Days Sales Outstanding

    • The days sales outstanding figure is an index of the relationship between outstanding receivables and credit account sales achieved over a given period.
    • Typically, days sales outstanding is calculated monthly.
    • DSO ratio = accounts receivable / average sales per day, or
    • Many financial reports will state Receivables Turnover defined as Net Credit Account Sales / Trade Receivables; divide this value into the time period in days to get DSO.
    • Changes in sales volume influence the outcome of the days sales outstanding calculation.