7) Where do Inventory and Cost of goods sold appear?
A) On the balance sheet and statement of retained earnings, respectively
B) On the statement of retained earnings and income statement, respectively
C) On the balance sheet and income statement, respectively
D) On the income statement and statement of cash flows, respectively
8) Which of the following is subtracted from Sales revenue to arrive at Net sales revenue?
A) Cost of goods available for sale
B) Cost of goods sold
C) Sales discounts and sales returns and allowances
D) Operating expenses
Learning Objective 5-6
1) Smith Company tries to manage their inventory levels so that they will have just enough to meet customer demand, without keeping an excess of funds tied up in inventory. Given this situation, Smith Company hopes to have a high number of days in inventory.
2) A small increase in the gross profit percentage could indicate:
A) a decrease in operating expenses.
B) a significant rise in net income.
C) lower inventory turnover.
D) a decrease in net income.
3) Which of the following is the result of gross profit divided by net sales?
A) Current ratio
B) Gross profit percentage
C) Debt ratio
D) Rate of inventory turnover
4) Which of the following is the result of cost of goods sold divided by average inventory?
A) Current ratio
B) Gross profit percentage
C) Debt ratio
D) Rate of inventory turnover
5) Which of the following is the gross profit percentage?
A) Gross profit minus net sales revenue
B) Gross profit divided by net sales revenue
C) Gross profit plus net sales revenue
D) Gross profit times net sales revenue
6) Which of the following correctly describes the rate of inventory turnover?
A) It is how quickly inventory is received from the supplier after the order is placed.
B) It is how many days it takes the inventory to travel between the seller's warehouse and the buyer's warehouse.
C) It is how rapidly inventory is sold.
D) It is how many days it takes from the time an order is received to the day it is shipped.
7) Which of the following correctly describes the gross profit percentage?
A) For most companies, the gross profit percentage changes little from year to year.
B) Merchandising companies strive to increase the gross profit percentage.
C) The gross profit percentage is one of the most carefully watched measures of profitability.
D) All of the above are true.
8) A company's net sales revenue is $540,000. Its cost of goods sold is $360,000. Its gross profit percentage is:
A) 33.33%.
B) 66.67%.
C) 150%.
D) 300%.