Exam 2

Question 1

Selling price =

Answer 1

List price - trade discounts

Question 2

Net price =

Answer 2

Selling price-allowable discounts(cash discounts)

Question 3

Net sale =

Answer 3

Actual money received after discounts and adjustments

Question 4

COGS

Answer 4

cost of merchandise sold+ any freight charges from the manufacturers

Question 5

Trade discounts

Answer 5

Means of adjusting the price for variations in the cost of raw material

Question 6

Trade pricing

Answer 6

Involves negotiating the actual price that will be paid

Question 7

Cash discounts

Answer 7

Offered to encourage early payment

Question 8

Special orders

Answer 8

Consist of standard products w slight modifications in design finish materials and packaging

Question 9

Minimum order

Answer 9

The minimum amount that must be ordered

Question 10

Freight allowed

Answer 10

The amount that must be purchased to have the manufacturer pay the cost of the freight for a standard shipment

Question 11

Cash flow

Answer 11

Cash in the bank leads to purchased inventory that leads to sold inventory then while we wait for the money we put it into accounts receivable then customer pays us and goes back to cash in the bank

Question 12

Gross margin

Answer 12

Difference between what a distributor pays for an item and the amount received from its sale
Selling price- COGS - adjustments

Question 13

Margin dollars

Answer 13

Used to pay employee cost and wages benefits and all other costs of doing business, should generate sufficient funds for a reasonable profit

Question 14

Percent gross margin (pgm) -GM%

Answer 14

(Selling price-COGS)/selling price ) x100

Question 15

Markup

Answer 15

How much money the distributor adds of cOGS

Question 16

OE Operating Expenses

Answer 16

All the cost necessary to provide services to a customer(warehouse cost,inventory holding cost, transportation cost and bad debt expense )

Question 17

Selling, general, and administrative expense (SG&A)

Answer 17

Include salaries, commissions, and all other payroll costs, and travel cost entertaining cost advertising cost

Question 18

EBITDA

Answer 18

= Margin-OE- SG&A

Question 19

Margin

Answer 19

What we use to pay

Question 20

EBIT

Answer 20

= EBITDA - Depreciation and Amortization
(Represents profit before the interest and taxes are subtracted)

Question 21

NPBT

Answer 21

net profit before tax , = EBIT- interests

Question 22

NPAT

Answer 22

Net profits after tax, represents the money which the owner can spend, distribute among the shareholders or reinvest in to company

Question 23

Accounts payable

Answer 23

The money the distributors owe for products purchased for the manufacturer

Question 24

Accounts receivable

Answer 24

Money customers owe distributors for goods and services provided to them( this is the ONLY interest free debt for our customers)

Question 25

Days sales outstanding

Answer 25

(Receivable dollars *365)/(sales)

Question 26

Inventory turn

Answer 26

When item is purchased>put into inventory>sold>collected(after its in accounts receivable)>another item is purchased. (COGS from inventory)/(avg warehouse inventory)

Question 27

Gross margin return on inventory investment

Answer 27

(Gross margin dollars earned on warehouse sales)/ (avg warehouse inventory )